2014 has witnessed a lot of vehicle recalls, U.S. being leading in that way. The latest entrant in that case is Ford Motor Company (F, Financial). It is a global automotive industry leader based in Dearborn, Mich., that manufactures or distributes automobiles across six continents. With about 186,000 employees and 65 plants worldwide, the company’s automotive brands include Ford and Lincoln.
Recall details
Ford has recalled about 850,000 vehicles in North America recently, including two of its most popular flagship vehicles. Due to an electrical snap, Ford recalled the likes of Fusion, C-Max and Escape. The recall was due to a systems glitch that can prevent the airbags from functioning properly in a crash. Affected vehicles include the 2013-14 Ford C-MAX, Fusion, Escape and Lincoln MKZ vehicles in model years 2013 and 2014. In the last two years, the Escape Crossover has been recalled about 12 times.
In the affected vehicles, the restraints control module may experience a short circuit. If a short circuit occurs, the airbag warning indicator will illuminate. Depending on the location of the short circuit, the deployable restraint systems (e.g., airbags, pretensioners, side curtains) may not function as intended in the event of a crash, increasing the risk of injury. The short circuit may also affect the function of other systems that use data from the restraints control module, including stability control. In these cases, the corresponding warning indicator lamps would also illuminate. Ford Motor Company is not aware of any accidents or injuries related to this condition. Dealers will replace the restraints control module at no cost to the customer. (Source: Company Website)
Similar problems faced by other manufacturers
General Motors (GM, Financial) also faced a controversial ignition switch problem. The problem got detected in the older models. The problem was serious as it led to serious repercussions. There were reports of 21 deaths and many injuries. Approximately 2.6 million vehicles were identified with this problem.
Fiat Chrysler also recalled around 350,000 vehicles on Thursday. It was done to repair faulty ignition switch.
All these recalls are making the automakers increasingly wary. They have to definitely deal with technical glitches, unhappy customers and loss of reputation.
Is this a matter of concern?
The Escape Crossover is among the most popular Ford vehicles. The fact that it has already been recalled 12 times is not a good thing. The issues were related to accelerator problems and engine overheating. It is true that for automakers, recalling vehicles is not new or strange. Still it may be a matter of concern for some investors. Nearly half of Ford’s utility segment sales are being accounted by the Escape. Continuous recalls may put its reputation in danger.
But the good news is that the recalls that Ford has witnessed so far are much less serious. Investors need not concern about the recalls as the Escape is Ford's highest-selling vehicle, and it is expected to continue to surge in the times to come.
“Vehicle launches are complex and each one has its own issues,” a Ford official said. “We work through them and while we know this is an inconvenience for our customers, we are trying to insure their safety.”
The vehicles now are no doubt better engineered, but still automakers have to deal with persistent recalls leading to higher costs. More than 40 million trucks and cars have been recorded in the U.S. this year. Investors hate recalls, and they take a toll on the company’s reputation. Automakers have to come up with detailed solutions so they don’t have to deal with huge costs related to recalls.
