Newswire

UPDATE 5-Ford taps Mazda boss to run struggling Europe unit

(Rewrites lead, adds details from Ford Europe conference call)

By Chang-Ran Kim and Madeline Chambers

TOKYO/FRANKFURT, Aug 27 (Reuters) - Ford Motor Co , the world's second-largest automaker, tapped the head of its Japanese affiliate Mazda Motor Corp to steer its loss-making European arm through a turnaround programme.

In a surprise announcement, Mazda said on Wednesday that Lewis Booth, who became president just over a year ago after running Ford's Asia-Pacific and Africa operations, would be replaced by a 38-year veteran of the Japanese company.

His successor, Hisakazu Imaki, will be the first Japanese and the first Mazda insider at the helm since Ford took a controlling minority stake in the company in 1996.

"Unfortunately 10 days ago the president of Ford Europe unexpectedly resigned," Booth told a news conference in Japan, acknowledging his move was unexpected.

"The future of Ford Europe is very important not just for Ford but for Mazda as well," he said.

Booth, who pledged to stick to Ford Europe's strategy, has a tough job ahead given the current environment of falling demand, pricing pressure and overcapacity in the region.

Ford Europe has in the last three years cut costs, shut plants and launched new models to gain long-term profitability.

"I don't believe this is a time for tearing up plans. It is a time to implement plans the team has put in place," Booth later told reporters from Europe on a conference call.

In the three months to end-June, the unit of Ford, itself battling against tough U.S. market conditions in its centenary year, posted a pre-tax loss of $525 million, blaming mainly a drop in car demand and fierce pricing competition.

A month later Martin Leach resigned as the unit's president and chief operating officer.

RETURN TO PROFIT

David Thursfield, Ford's executive vice president for international operations and global purchasing, said he hoped Ford Europe would return to profit by the end of the year.

"I would be disappointed if we don't return to profit in the fourth quarter," he said, noting the third quarter was traditionally weak.

He said the environment in Europe was getting tougher but Ford Europe would respond, declining to give details.

Some analysts questioned whether existing plans would be enough to engineer a turnaround.

"There are structural issues on both the cost side and the product side which need to be addressed at Ford Europe," said Michael Raab, an auto analyst at Sal Oppenheim in Frankfurt.

The unit lost market share in the late 1990s as its products' appeal faded and it missed out on the start of Europe's diesel boom.

With 2002 sales of 1.5 million units, it remains larger than Mazda, which sold just over one million cars globally in the last business year.

But Mazda, while still a minor player in western Europe with less than a two percent market share, is growing faster than its rivals with popular new models such as the Mazda6/Atenza sedan.

The Hiroshima-based company's sales in Europe rose 34 percent in the three months to June, helping to boost overall revenue by 10 percent, and it expects to post its highest operating profit in a decade in the current year to March 2004.

Booth said that, while the timing of his departure was a surprise even to him, he was confident the transition would be seamless because of his successor's experience.

Imaki, 60, will be Mazda's sixth president in seven years.

UBS Securities analyst Takaki Nakanishi said Imaki, as a Japanese national and Mazda veteran, may well stay in the post for a lengthy period, allowing a consistent strategy to develop.

"We believe this personnel reshuffle could be very positive for morale at Mazda and we have considerable expectations for the Imaki team," Nakanishi said in a note.

Mazda's shares ended down 0.65 percent at 306 yen, roughly in line with the benchmark Nikkei average . (Additional reporting by Yuka Obayashi and Nathan Layne in Tokyo)