DETROIT -- Ford Motor Co. has launched a review over whether COO Nick Scheele violated company policies by ordering the consolidation of the company's multibillion-dollar advertising budget with WPP Group Plc.
It will investigate whether Scheele's decision was influenced by his friendship with WPP head Martin Sorrell, and the fact that Scheele's son works for WPP Group in New York.
The investigation started by Ford's purchasing department will also determine whether Scheele's decision met Ford's objectives for cost-cutting, said Ford spokesman Jim Bright
WPP Group, the world's largest advertising firm, already handles 80 percent of Ford's ad business, including its Ford, Lincoln, Mercury, Jaguar and Land Rover brands.
Bright said the decision began with Ford's marketing staff, which was frustrated by a lack of coordination with WPP's various agencies. At the request of Ford's marketing department Scheele told WPP's leaders in November 2002 that if they appointed one executive to work with Ford, the automaker would "make them the preferred or sole source for marketing support," Bright said.
WPP Group did appoint a executive to manage contact with Ford, and Scheele sent a memo in February to Ford's marketing executives making WPP the sole advertising supplier. WPP's share of Ford's marketing spending has not changed since then, Bright said.
Bright said the "normal review" was part of Ford's drive to slash costs. Ford has been under pressure to speed up its cost-cutting plans and meet its targets toward earning $7 billion in annual pretax profits by mid-decade.
Scheele, 59, was promoted in October 2001 after turning around Jaguar, a performance that earned him a knighthood. But he and Ford's other top executives have been under increasing pressure to speed cost-cutting efforts.
Despite promising earnings of 70 cents a share for all of 2003, the average Wall Street forecast predicts Ford will earn 51 cents a share this year according to Thomson First Call. And Ford's bonds were hit last week over worries of a credit rating downgrade; credit rating agencies have said Ford's ratings could be cut if it did not appear on track to break-even profits in its automotive unit this year.
WPP declined to comment on the internal investigation at Ford, which was revealed for the first time in Monday's editions of The Detroit News newspaper.