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Old 12-10-2003, 05:36   #1 (permalink)
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Ford: Exec had conflict of interest

Automaker says former chief of European operations secretly pursued post at Fiat

By David Shepardson / The Detroit News

DETROIT ó Ford Motor Co. said the former president of its European operations was secretly negotiating for a job at Fiat Auto SpA while he was spearheading Fordís "head-on battle for market share" with the Italian automaker.

The accusations came to light Tuesday in a 57-page document Ford filed in U.S. District Court in Detroit in response to a lawsuit by Martin Leach.

Leach left his job as head of Ford of Europe in August after receiving an offer to run Fiat.

"(Leach) was intimately involved in the development and implementation of Fordís European marketing and product campaign that specifically targeted Fiat ó creating a clear conflict of interest for (Leach)," Fordís filing says.

Leach filed suit last month after Ford blocked his move to Fiat, citing a noncompete agreement that prevents him from working for another automaker for two years if he voluntarily resigns.

Fiat eventually hired former Volkswagen Brazil head Herbert Demel as CEO.

Leach, a former race car driver who worked at Ford for 28 years, said the noncompete isnít valid because he was pressured to leave. Ford said he resigned.

Either way, Leach was under scrutiny this summer after Ford of Europe posted a $525 million dollar second quarter loss, a result the company said was very disappointing.

To bolster its contention that Leach quit, Ford included in its filing a two-page memo that outlined a litany of complaints Leach made against Ford in an Aug. 7 meeting with Ford Executive Vice President David Thursfield and John Walker, director of human resources, according to the suit.

"Several issues have combined to create an untenable situation ó leadership vacuum, avoidance of addressing fundamental business governance issues," said Leachís two-page memorandum that he read during the meeting.

According to the memo, Leach said he had "lost faith in senior management," but wanted to leave the company on a positive public note and would agree "not to throw (Ford) to the wolves," the statement said.

In a deposition with Ford lawyers Dec. 4, Leach said his lawyer had prepared the two-page memo and said he began discussions with Fiat in June 2003 ó two months before he told Ford, according to the court filing.

Leachís move to Fiat was contingent on Fordís approval that Ford refused to give. It sued in a German court to block the move. Fiat withdrew the job offer and Ford withdrew the suit.

Leachís suit asks U.S. District Judge Paul Borman to issue an injunction preventing Ford from enforcing its noncompete clause, declare that he was fired and award him at least $75,000 in damages.

Leachís contract says if he voluntarily resigns he canít work for another automaker for two years ó if he is fired, he isnít bound by the contract.

Leach couldnít be reached for comment and his Detroit law firm referred questions to his spokesman in England, David Rigg.

"The general principle in play is that once you get to a senior level at Ford the implication is you canít work anywhere else," Rigg said.

Ford has also filed a legal claim against Leach under the Uniform Trade Secrets Act.

As president of Ford of Europe, Leach was "was privy to, and in fact, developed many of Fordís highly confidential European automotive marketing strategies," Ford said.

Ford claims Leachís "work included involvement in Fordís most sensitive long-range project planning, design and advance engineering developments ... and long-range strategies designed to improve Fordís position in both the European and worldwide markets."

Fordís legal filing disclosed that Fiat was planning to give Leach a hefty raise in salary. Fiat offered him a 1 million euro ($1.22 million) signing bonus and a yearly salary of 1.8 million euros ($2.2 million). He was also guaranteed a 600,000-euro or $735,000 bonus, and could earn up to 3 million euros ($3.75 million) in stock options.

The Fiat contract also had a noncompete clause for two years after "termination, for any reason, of your employment with the company."

The companyís legal filing further noted that Leach has a highly paid consulting deal with London-based A.T. Kearney Ltd.

Leach got $113,000 for writing a paper and agreeing to let Kearney use his name. He is paid $3,500 for every day he works, according to copy of his contract.

Borman will hold a hearing Dec. 18 on Leachís request for an injunction.
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