Ford Won't Consolidate Advertising Unit

DETROIT March 11, 2003; John Porretto writing for the AP reported that Ford Motor Co. president and chief operating officer Nick Scheele has rescinded an order to consolidate the automaker's multibillion-dollar advertising business with a sole agency, although the plan is still under consideration, the company said Tuesday.

Ford's human resources chief opened an inquiry last month after Scheele, the No. 2 executive after chairman and CEO Bill Ford, ordered all of Ford's marketing and advertising business directed to London-based WPP Group, company officials said. Questions were raised about the order because Scheele is friends with WPP's chairman and his son works in the firm's New York office.

Scheele sent a letter to company officers Tuesday asking that the same proposed arrangement be reviewed by senior representatives of the marketing, purchasing and finance departments to ensure it conforms with the company's single-source supplier criteria.

A Ford spokesman said late Tuesday that the investigation of Scheele had been completed. The company will review his previous order to determine whether it ought to be implemented, Ford spokesman Jim Bright.

"This basically wipes the blackboard clean," he said of Scheele's action. "Now they'll look at it with a fresh set of eyes and make sure it adheres to all company policies."

At issue in the Ford probe was whether Scheele's order violated company purchasing policies regarding single-source vendors. Also under scrutiny was Scheele's relationship with WPP chief Sir Martin Sorrell and the fact that Scheele's son, James, works in the New York office of WPP's Young & Rubicam division.

WPP already controls 80 percent of Ford's multibillion-dollar advertising business.

The distraction surrounding Scheele comes as Ford is trying to slash costs and return to profitability after losing $980 million last year and nearly $5.5 billion in 2001.

Ford has said in the past month and a half that he expects the company to improve market share in all global regions this year and post earnings ahead of Wall Street forecasts.

But business industrywide has slowed as consumers shy away from large purchases and prepare for even higher gas prices as the U.S. ponders war with Iraq.

Some analysts already have lowered forecasts for new car and truck sales this year, and Ford's stock price fell Tuesday to levels not seen in 15 years amid worries about its pension liabilities, credit ratings and overall financial health.

Ford allows single-source arrangements if they offer the company competitive or significant cost advantages.

"You've got to be able to peel back the onion and justify those areas," Bright said earlier. "And it requires significant documentation to be sent by a senior officer of the company to the head of global purchasing."

After a speech Tuesday at the Atlanta International Auto Show, Scheele said the inquiry arose "because we have a very open process in Ford that if you have questions we will answer them, and we did."

Domenic Martilotti, an analyst with Bear Stearns, said consolidating advertising business was not unusual. DaimlerChrysler AG's Chrysler Group did the same thing within the past two years, he said.

Still, Martilotti said, corporate governance issues garner attention these days.

Scheele, who began his career with Ford in 1966, was named president and COO in October 2001 after Ford fired chief executive Jacques Nasser. Ford assumed the additional role of CEO.