New Recall, Ford’s Collapsing Reputation

The National Highway Traffic Safety Administration has announced another Ford Motor Co. (NYSE: F | F Price Prediction) recall. This time, 115,539 vehicles are recalled for a defect that could affect the steering column. The recall includes certain F-250, F-350, and F-450 pickup trucks from model years 2020 and 2021. The F-Series pickups are Ford’s bestselling product and make up about a third of all of its U.S. sales.

Ford has had over 105 recalls this year, which include about 6.5 million vehicles. For the first eight months of the year, Ford’s U.S. sales totaled 1,492,905. This was a 6.6% increase over the same period last year. The ratio between the sales and recalls is staggering.

The recalls raise the question of whether Ford makes safe products. There is also the question of how much the trouble is damaging corporate earnings.

In October of last year, Ford made a downward revision of its earnings forecasts because of warranty costs. At the time, CEO Jim Farley said, “Cost, especially warranty, has held back our earnings power, but as we bend that curve, there is significant financial upside for investors.” Recalls this year show that the curve is not bending in the right direction. In fact, it is getting worse. This May, Farley said warranty costs remained a persistent problem.

It is too early to say how quality problems could hurt Ford’s newest manufacturing project. Last month, Ford announced what it calls its “Universal EV Platform.” It will completely change the way the company makes electric vehicles. Management said it would transform “the traditional assembly line into a tree with three main branches.” One disappointment about the announcement is that the first vehicle off the new assembly line will not leave the factory until 2027. And, at that time, it will only be one vehicle. That is a mid-sized electric truck with a price target of about $30,000.

Ford can make new products and publicize things like its new headquarters. These are distractions from one of the most important things a car manufacturer can do: produce a quality vehicle that does not have to be called back to dealers to get repaired.

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