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By Madeline Chambers and Justin Hyde
FRANKFURT/DETROIT, Aug 27 (Reuters) - Ford Motor Co. on Wednesday tapped the head of Japanese affiliate Mazda Motor Corp. to return its European operations to profit after a surprising loss threatened Ford's turnaround plans.
Lewis Booth, a 25-year Ford veteran, will replace Martin Leach, who unexpectedly resigned 10 days ago as the president and chief operating officer of Ford of Europe.
The move came amid growing concern that Ford of Europe's $525 million second-quarter loss could portend trouble for Ford's company-wide turnaround plan, aimed at producing $7 billion in pretax profit by mid-decade.
Ford of Europe's efforts in recent years to cut costs, shut plants and launch new models had been held up as the model for the company's turnaround efforts in North America. After the loss was reported, many analysts said they were unable to explain why it was so large, even accounting for lower demand and weaker pricing in Europe, as well as the costs of launching new models.
On Tuesday, Standard & Poor's credit analyst Scott Sprinzen warned Ford needed "to show markedly better financial results in Europe over the next few quarters compared with its dismal performance during the second quarter."
Ford's credit rating is two notches above "junk," and Sprinzen said it could be downgraded at any time if Ford appeared to be falling short of its financial targets.
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.
In a news conference in Japan, Booth acknowledged his move was unexpected, and that the timing was a surprise even to him. But he pledged to continue carrying out the turnaround strategy laid out by Thursfield.
"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.
Those plans include a wider range of parts sharing among Ford, Mazda and Ford's European luxury brands, as well as a greater emphasis on diesel engines, which are in high demand in Europe. But 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.
Mazda said Booth, who became its president about a year ago after running Ford's Asia Pacific and Africa operations, would be replaced by Hisakazu Imaki, a 38-year Mazda veteran.
Imaki, 60, 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. He will also be Mazda's sixth president in seven years, as Ford has often used Mazda as a training ground for executives it later promoted to other jobs around the world.
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.
Ford shares were up 18 cents, or 1.58 percent, at $11.59 in late morning trading on the New York Stock Exchange.
(With additional reporting by Chang-Ran Kim, Yuka Obayashi and Nathan Layne in Tokyo)