Ford recall will cost $850 million
Washington — Ford Motor Co. said its Friday recall of 850,000 vehicles for airbag problems will cost the company $500 million and reduce its profit outlook for the year, as the stock plunged 7.5 percent.
Ford stock sank by $1.22 a share to $15.11, its lowest price since March, as trading closed on the New York Stock Exchange — and continued to fall in after-hours trading. The company announced some other bad news: a $1 billion forecasted loss in South America — much higher than previously forecast — and a $1.2 billion loss in Europe, also above other forecasts. Ford briefly fell below $15 a share for the first time since February.
At the company’s investor day on Monday, Ford Americas chief Joe Hinrichs said the recall will mean the company’s profit margins this year will be on the low end of the 8-9 percent forecast, saying it will amount to a “significant” impact on the company’s performance.
The company is upping its costs for recalls and warranty reserves by $1 billion, including the $500 million recall charge.
It is the latest expensive recall for the auto industry which is approaching 50 million vehicles recalled this year — far exceeding the previous all-time record of 30.8 million vehicles recalled in 2004. Just on Monday, Toyota Motor Corp. announced a recall of nearly 700,000 vehicles in the United States as the high pace of recalls shows little sign of slowing.
Ford has now recalled nearly 3.9 million vehicles in the United States this year, compared with nearly 1.2 million for all of last year. It’s one of many automakers that have had recalls far exceed what they had in prior years.
General Motors has taken $2.5 billion in recall charges this year after it has recalled 26 million vehicles in the United States and 29.3 million worldwide in 68 separate campaigns.
Fiat Chrysler took a $140 million charge against first-quarter earnings related to the company’s recall in late March of nearly 870,000 SUVs for brake problems. Chrysler will install a shield that protects brake boosters from corrosion on 2011-14 Jeep Grand Cherokee and Dodge Durango SUVs. Last year, Chrysler and NHTSA sparred over fire risks in older SUVs. Chrysler ultimately agreed to recall 1.56 million Jeep SUVs under government pressure. It said the recall would cost $151 million.
Ford said its latest recall was prompted by an electrical glitch which could prevent the air bags from deploying in a crash. The recall covers some 2013-14 Ford C-MAX, Fusion, Escape and Lincoln MKZ vehicles in North America. The restraints control module is to blame. It can short-circuit, Ford said.
The company said if a short circuit occurs, the air bag warning indicator will illuminate. Depending on the location of the short circuit, the air bags, pretensioners and side curtains may not function as intended. It may also affect other systems that use data from the module, including stability control.
The 2013 Escape, included in the callback, has in a short period become one of Ford’s most recalled vehicles. This marks the 12th recall for various versions of the 2013 Escape; Ford has issued 41 technical service bulletins for various problems.
Ford said it is not aware of any crashes or injuries related to the faulty module. Dealers will replace it.