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Monday, March 10, 2003
Exclusive Report

Scheele's order to steer business exclusively to London-based group raises questions

By Mark Truby, Bill Vlasic and Daniel Howes / The Detroit News

DEARBORN -- Ford Motor Co. is probing whether President Nick Scheele may have improperly steered business to WPP Group, the London-based conglomerate that controls most of the automaker's multibillion-dollar advertising accounts.

Ford's head of human resources, Joe Laymon, opened the internal inquiry in February after Scheele, Ford's No. 2 executive, sent a one-page letter to executives ordering the consolidation of Ford's marketing and advertising business with WPP Group, according to people close to the situation.

A small group from Ford's human resources and purchasing divisions is questioning whether Scheele's directive violates company policies governing single-source suppliers by channeling all of its advertising to WPP. Ford is the world's second largest advertiser.

The inquiry also is examining Scheele's ties to WPP Chairman Sir Martin Sorrell and the fact that Scheele's son, James, is an account manager in the New York office of WPP's Young & Rubicam division.

"Nick Scheele always does what he perceives to be the right thing for Ford," spokesman Jim Bright said, declining to confirm or deny whether an inquiry is under way. "He made this decision with the urging and support of the marketing team."

Scheele was traveling Sunday and could not be reached for comment.

The probe, findings of which could be sent to the board of directors, comes as corporate America is under increased scrutiny for allegations of self-dealing and questionable business relationships.

The inquiry also reflects Ford Chairman and CEO Bill Ford Jr.'s push for the company to be more open and transparent in its dealings with suppliers, investors and the public.

Scheele, a member of the board of directors and also chief operating officer, has been advised to stop any direct decisionmaking over WPP accounts until the inquiry is complete, which should happen within the next month, the people said.

According to one person close to the matter, senior purchasing executives were startled by the decision outlined in Scheele's letter. Still, company officials said Scheele and Ford marketing executives pushed the plan to gain efficiency and save money at a time when Ford is trying to cut costs after losing $6.4 billion in the past two years.

Ford has put the decision to consolidate its business with WPP on hold until the inquiry is complete, sources said.

Scheele told Sorrell and other WPP executives of the plan at a Nov. 1 meeting in New York. Scheele's directive would not only protect WPP's current business with Ford, but also could generate millions of dollars in new revenues for WPP.

The move raised concerns among some Ford executives about Scheele's close relationship with Sorrell, a fellow knighted British citizen. In the past, Scheele has been outspoken in his admiration for Sorrell.

"Martin has put together an absolutely unrivaled assembly of companies in all aspects of marketing," Scheele said in a New York Times article published last March.

On Jan. 27, Scheele and Sorrell led a group of British executives supporting trade issues at the World Economic Forum in Davos, Switzerland. Shortly after returning from Davos, Scheele sent the WPP letter to Ford executives.

Scheele's son, James Scheele, works for WPP's Young & Rubicam in New York and had been an intern at WPP's Coley Porter Bell in London. James Scheele graduated from Northwestern University in 2000, according to the university's alumni Web site.

A year ago, Scheele notified Ford's human resources department that his son had accepted a full-time job with a unit of Young & Rubicam, sources said. Among Young & Rubicam's accounts are the Ford division and other Ford-owned brands, including Lincoln Mercury, Jaguar Cars, Volvo and Land Rover.

Scheele told Ford human resources that his son would not be working directly on Ford accounts, a conclusion confirmed by Ford's inquiry.

WPP Group is the corporate owner of one of the world's largest collections of advertising, marketing and public relations firms, including ad agencies J. Walter Thompson, Young & Rubicam and Ogilvy and Mather.

WPP Group already controls most of Ford's multibillion-dollar advertising business and has added more in recent years. Detroit-based J. Walter Thompson USA oversees the Ford division's estimated $1.7 billion U.S. advertising budget. Young & Rubicam controls Ford's Lincoln Mercury division's advertising.

Ford's decision to funnel more of its advertising and marketing business with WPP Group paves the way for WPP Group to add millions of dollars in additional Ford business. More importantly, it gives WPP an apparent monopoly on Ford business in the future.

The decision, outlined in Scheele's letter, would make it difficult -- if not impossible -- for competing ad agencies to bid for Ford accounts. Within the rough-and-tumble ad industry, firms typically compete fiercely to win major accounts.

Scheele, 59, began his career with Ford in 1966. He headed Ford-owned Jaguar Cars Ltd. from 1992-99 and has been credited with improving the luxury carmaker's financial performance and manufacturing operations.

In 1999, Scheele was named chairman of Ford of Europe, where again he was charged with turning around a struggling operation. Two years later, Ford brought Scheele to Dearborn to head its struggling North American operations.

In October 2001, Ford Chairman Bill Ford Jr. fired CEO Jacques Nasser. In the aftermath, Bill Ford Jr. took over the CEO position and Scheele was named president.

Scheele is described as personally close to Sorrell, who started WPP in 1985 out of the corporate shell of Wire & Plastic Projects PLC, a British manufacturer of wire baskets.

Two years later, Sorrell shocked the advertising world with a $566 million buyout of J. Walter Thompson, Ford division's longtime agency, and followed in 1989 with an $864 million acquisition of The Ogilvy Group.

WPP became the world's largest ad agency when it bought Young & Rubicam, which handles Ford's Lincoln-Mercury account, for $4.7 billion in 2000.

WPP's financial performance suffered from the overall slump in advertising last year. Its profits plunged 19 percent last year and revenues fell 3 percent.
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