No one wants to hear the word “remember.” Most will immediately imagine some of the worst recall debates in automotive history, but the truth is that there are many, many recalls throughout the industry all the time. Unfortunately, it’s a part of the automotive industry, a big part even. Let’s take a look at Ford Motor CompanyS ‘ (NYSE:F) The latest drawdown and what it means for investors.
Bread and butter
When it comes to profitable products, Ford’s F-150 full-size pickup truck is easily the company’s bread and butter and generates big profits for the folks at the Blue Oval. So it’s especially disappointing and concerning to hear that the company is recalling 552,188 F-150s in the US due to a problem with the powertrain control module.
Ford said it is aware of 300 warranty reports, 96 field reports and 124 complaints about the problem, which can cause a sudden downshift in first gear, increasing the risk of a crash or loss of vehicle control.
Ford plans to update the vehicles’ engine control modules and expects a fix to be available by the third quarter. But what does this mean for investors?
While memoir headlines may be murky and fears of mass lawsuits may hang in the balance, the truth is that this is par for the course. Ford plans for warranty costs and anticipates these things to happen, so it shouldn’t have any material impact on the company’s quarterly results.
This is the good news. The bad news is that this is becoming a trend.
A prize you don’t want to win
If you thought Ford led the industry in recalls for 2023, you’d be right. In fact, Ford has had the most recall of any American automaker for three straight years — not exactly the reputation or brand you want to build.
It’s a problem, but one that’s moving somewhat in the right direction. In 2022, Ford reported 68 recalls affecting more than 8.7 million vehicles, but that number dropped 21% to 54 recalls and 5.7 million vehicles in 2023. Year to date, Ford has issued 30 recalls in the U.S. that affect slightly more than 3.6 million vehicles.
“Voluntary recalls are one of the ways we proactively protect customers from experiencing a problem. Our initial quality is improving, and customers with our latest vehicles are benefiting from it,” said Ford spokeswoman Maria Buczkowski. Automotive News.
What does it all mean?
While the headlines can be murky, and the worst recalls can amount to billions of dollars in losses, they are few and far between. While investors shouldn’t be content to see Ford’s product roll back into the hundreds of thousands, the truth is that it shouldn’t materially affect an investment thesis despite the doom and gloom headlines.
On the other hand, this is definitely a trend for Ford, as it consistently leads the industry in recalls, and it’s certainly something to keep an eye on because it doesn’t help the brand.
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Daniel Miller holds positions at Ford Motor Company. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
A bit of bad news for Ford investors was originally published by The Motley Fool