No one wants to listen to the word “recall.” Most will immediately imagine among the worst recall debacles in automotive history, but the reality is there are a lot of, many recalls throughout the industry continuously. Unfortunately, it’s a component of the automotive industry, a giant part even. Let’s take a have a look at Ford Motor Company‘s (NYSE: F) recent recall and what it means for investors.
Bread and butter
In the case of profitable products, Ford’s F-150 full-size truck is well the corporate’s bread and butter and generates enormous profits for the oldsters on the Blue Oval. So it’s especially disappointing and concerning to listen to the corporate is recalling 552,188 F-150s within the U.S. due to a difficulty with the powertrain control module.
Ford said it’s aware of 300 warranty reports, 96 field reports and 124 complaints as a result of the problem that might cause an abrupt downshift into first gear, increasing the danger of a crash or losing control of the vehicle.
Ford plans to update the vehicles’ powertrain control modules and expects an answer to be available by the third quarter. But how much does this mean to investors?
While the headlines of recalls will be jarring and fears of massive lawsuits can hang within the balance, the reality is that this is par for the course. Ford plans on warranty costs and anticipates this stuff happening, so it should not have any material impact on the corporate’s quarterly results.
That is the excellent news. The bad news is that that is becoming a trend.
An award you do not need to win
In case you guessed Ford led the industry in recalls for 2023, you would be correct. In truth, Ford has had probably the most recalls of any U.S. automaker for 3 straight years — not precisely the repute or brand you wish to be constructing.
It’s an issue, but an issue that is somewhat moving in the correct direction. In 2022 Ford reported 68 recalls affecting greater than 8.7 million vehicles, but that figure dropped 21% to 54 recalls and 5.7 million vehicles in 2023. 12 months-to-date, Ford has issued 30 U.S. recalls affecting just over 3.6 million vehicles.
“Voluntary recalls are one among the ways we proactively protect customers from experiencing a difficulty. Our initial quality is improving, and customers with our latest vehicles are benefiting from it,” Ford spokesperson Maria Buczkowski told Automotive News.
What all of it means
While the headlines will be jarring, and the worst recalls can amount to billions of dollars in losses, those are few and much between. While investors shouldn’t enjoy seeing Ford’s bread-and-butter product being recalled within the lots of of 1000’s, the reality is that this shouldn’t materially impact an investing thesis despite headlines that shout doom and gloom.
On the flip side, that is clearly a trend for Ford because it continually leads the industry in recalls, and it’s definitely something to control because this does not help the brand.
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Daniel Miller has positions in Ford Motor Company. The Motley Idiot has no position in any of the stocks mentioned. The Motley Idiot has a disclosure policy.
A Little Bad News for Ford Investors was originally published by The Motley Idiot