No one wants to hear the word “remember.” Most will immediately imagine some of the worst recall debacles in automotive history, but the truth is that there are a ton of recalls happening all the time across the industry. Unfortunately, it is part of the automotive industry, to a large extent in fact. Let’s see Ford Motor Company‘S (NYSE:F) recent recall and what it means for investors.
Bread and butter
When it comes to profitable products, Ford’s F-150 full-size truck is easily the company’s bread and butter, generating huge 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 U.S. due to a powertrain control module issue.
Ford says it is aware of 300 warranty reports, 96 field reports and 124 complaints about the problem, which can cause abrupt downshifts to first gear, increasing the risk of a crash or loss of vehicle control.
Ford plans to update the vehicles’ powertrain control modules and expects a fix to be available in the third quarter. But what does this mean for investors?
While recall headlines can be shocking and the fear of huge lawsuits can hang in the balance sheet, the truth is that this is normal. Ford plans warranty costs and expects them to happen, so it shouldn’t have a material impact on the company’s quarterly results.
That’s the good news. The bad news is that this is becoming a trend.
A prize you don’t want to win
If you suspected that Ford was leading the way in recalls for 2023, you’d be right. In fact, Ford has had the most recalls of any U.S. automaker for three years in a row—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 figure dropped 21% to 54 recalls and 5.7 million vehicles in 2023. To date, Ford has issued 30 recalls in the U.S. affecting had on just over 3.6 million vehicles.
“Voluntary recalls are one of the ways we proactively protect customers from problems. Our initial quality improves and customers with our latest vehicles benefit,” said Maria Buczkowski, Ford spokesperson. Automotive news.
What it all means
While the headlines can be shocking, and the worst recalls can amount to billions of dollars in losses, these are few and far between. While investors shouldn’t be thrilled to see Ford’s bread-and-butter product being recalled by the hundreds of thousands, the truth is that it shouldn’t have a material impact on an investment thesis, despite headlines that scream doom and gloom.
On the other hand, this is clearly a trend for Ford, as the company is consistently leading the industry in recalls, and it’s definitely something to keep an eye on as this isn’t helping 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
