It’s not a great sign when Ford recalls its most important product, but here we are.
Nobody wants to hear the word “recall.” Most will immediately imagine some of the worst recall debacles in automotive history, but the truth is there are many, many recalls throughout the industry constantly. Unfortunately, it’s a part of the automotive industry, a big part even. Let’s take a look at Ford Motor Company‘s (F 2.54%) 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 and generates enormous profits for the folks at the Blue Oval. So it’s especially disappointing and concerning to hear the company is recalling 552,188 F-150s in the U.S. because of an issue with the powertrain control module.
Ford said it is aware of 300 warranty reports, 96 field reports and 124 complaints due to the issue that could cause an abrupt downshift into first gear, increasing the risk of a crash or losing control of the vehicle.
Ford plans to update the vehicles’ powertrain control modules and expects a solution to be available by the third quarter. But how much does this mean to investors?
While the headlines of recalls can be jarring and fears of massive lawsuits can hang in the balance, the truth is this is par for the course. Ford plans on warranty costs and anticipates these things happening, so it shouldn’t have any material impact on the company’s quarterly results.
That’s the good news. The bad news is that this is becoming a trend.
An award you don’t want to win
If you guessed Ford led the industry in recalls for 2023, you’d be correct. In fact, Ford has had the most recalls of any U.S. automaker for three straight years — not exactly the reputation or brand you want to be building.
It is a problem, but a problem that’s somewhat moving 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. Year-to-date, Ford has issued 30 U.S. recalls affecting just over 3.6 million vehicles.
“Voluntary recalls are one of the ways we proactively protect customers from experiencing an issue. Our initial quality is improving, and customers with our latest vehicles are benefiting from it,” Ford spokesperson Maria Buczkowski told Automotive News.
What it all means
While the headlines can be jarring, and the worst recalls can amount to billions of dollars in losses, those are few and far between. While investors shouldn’t enjoy seeing Ford’s bread-and-butter product being recalled in the hundreds of thousands, the truth is this shouldn’t materially impact an investing thesis despite headlines that shout doom and gloom.
On the flip side, this is clearly a trend for Ford as it continually leads the industry in recalls, and it’s certainly something to keep an eye on because this doesn’t help the brand.
Daniel Miller has positions in Ford Motor Company. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.