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News that



head of European operations has stepped down is sparking concern on Wall Street.

On Tuesday, Ford said Martin Leach, its top executive in Europe, was leaving to pursue other opportunities, and that David Thursfield, executive vice president, would serve as an interim replacement.

To Prudential Securities, the resignation suggests that a turnaround at Ford Europe has "lost its way."

"The departure of Ford Europe's top executive highlights that Europe has not recovered as planned, so it will likely continue to drag on the overall results and may put the 2003 breakeven goal for the automotive business in jeopardy," said Michael Bruynesteyn, an analyst at Prudential, in a research note.

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Ford's European division has been struggling for months to get itself in gear. The unit reported a loss of $525 million before taxes during the carmaker's most recent second quarter.

Bruynesteyn said Europe's ongoing problems inspire little confidence in North America's prospects.

Moreover, Bruynesteyn said, "Ford's capital spending is expected to remain high for the next several years, which should keep free cash flow in the red through 2005." For that reason, he favors

General Motors


as an investment.

"We prefer the stock of General Motors over Ford over the next 18 months," said Bruynesteyn. "We view the dividend at GM as more secure than Ford's (and the yield is higher), the cadence in 2004 is substantially better, management has a better reputation with investors and the cost-reduction record is more established and credible. We also see neutral cash flow at GM."

Despite the negative commentary, Ford closed up 0.2% at $10.73. GM rose 1.4% to $37.63.