Generally speaking, ford motor company (F 1.59%) Bringing awards at the end of the year, it’s positive news.
However, there are exceptions. The one exception, and one that Ford wanted to stop winning, was the highest number of vehicle recalls in the United States for the second year in a row.
Car recalls are an unfortunate part of business, but how will this affect Ford and its investors in the near future? How does Ford’s recall compare to other major automakers? What caused it? What is Ford doing to fix the underlying problem?
These are all important questions for investors, so let’s dig in.
when winning is losing
By mid-December, Ford had issued 65 recalls, affecting a staggering 8.6 million units by 2022. That’s an increase from Ford’s previous year, which recorded 53 recalls covering about 5.4 million vehicles.
For comparison, crosstown rivals general motors (GM 1.35%) There were 30 recalls affecting over 3.2 million vehicles. Stella (STLA 1.46%) In North America, there were 38 recalls affecting over 3 million vehicles.
There are many factors that contribute to increased recall levels. Recalls generally increase when major automakers release new technology and new model lists. While we can expect more recalls as Ford introduces new models, it’s safe to say that the automaker’s quality isn’t as good as expected.
“We are improving our launch and early quality, but the overall quality is not as good as it should be. So we have a comprehensive end-to-end process to improve quality and keep it high. We are expanding,” said Ford CEO Jim Farley. car news.
see the big picture
Yes, Ford recalling the most vehicles for the second year in a row is not something automakers want to make a habit of. But before understanding how much this will affect automaker sales, it’s important to look at the big picture.
Ford admits it wants to improve initial quality, but the automaker is far from the worst, according to JD Power’s 2022 U.S. Initial Quality Study. based on a 223-question-based survey covering vehicle categories and aims to provide information on the number of quality issues in specific vehicles and brands.
In the aforementioned survey, the Ford brand was ranked 10th.th 167 issues per 100 vehicles, or PP100, from best (1st) to worst (33rd) of the 33 brands listed. Although Ford fell short of GM’s Buick, Chevrolet, GMC and Cadillac brands, it outperformed the industry average of 180 PP100.
The most important question for investors is how these recalls will affect current and future sales. According to JD Power’s Chris Sutton, the recall will have a “fairly small” impact on consumers’ willingness to buy another of the same brand.
Citing a 2022 JD Power Customer Service Index study, Sutton said, “Most customer service jobs, depending on the type of job, have 35% of customers who consistently return and buy back the brand.” I answered,” he said. car news“If a customer comes in for a recall, it goes down to 32% of customers. [who] They said they would definitely buy back the brand. ”
It’s also worth noting that even massive recall scandals like General Motors’ ignition switch scandal, which targeted 30 million cars worldwide nearly a decade ago, didn’t derail the company for the long haul. . In fact, when GM’s recall swept the country in 2014, GM maintained market share in the U.S. market and set global sales records.
What investors should look out for
Investors would be better off focusing their investment themes on other aspects of Ford rather than worrying about leading the industry in recalls.
One of the key aspects for Ford is the acceleration of its EV strategy, which is gaining momentum. Ford’s EV sales will more than double in 2022 and is growing twice as fast as his industry. In fact, Ford’s EV sales increased by 223% in his December alone. The F-150 Lightning was the No. 1 electric truck sold in the US in November and December and helped propel Ford EV to his No. 2 EV brand in the US market.
In addition to Ford’s expanding EV lineup, traditional internal combustion engine vehicles continue to thrive. Sales of the F Series exceeded 650,000 units, making it the best-selling truck for the 46th consecutive year and the best-selling vehicle for the 41st consecutive year. The collection of SUVs, led by the Bronco, which accounts for his 36.4% of the SUV segment, increased Ford’s share of the segment by 1.2 percentage points to 10.3%, the highest level since its launch.
Until the world adopts EVs at a faster pace, Ford’s full-size trucks and SUVs will continue to carry most of the automaker’s profits.
Ford hopes to top the list of recalls in the U.S. again, but it’s part of the auto industry’s business and the company is focused on improving quality. It’s also important to note that it’s not a large-scale recall scandal compared to industry incidents. Headlines sound much worse than you might think, than their actual impact on consumer retention.
Ford has quality issues to improve, but investors can focus their investment themes on other aspects of the company rather than headlines about the large number of recalls.