The Truth About Ford's Recalls


Ford's Michigan Assembly Plant. Photo Courtesy of Ford.

Last Friday The Detroit News reported the latest in Ford's (NYSE: F  ) round of vehicle recalls, noting that it would call back 465,000 vehicles for leaky fuel tanks and fire risks. Unfortunately for the Detroit automaker, it isn't the first issue that has made headlines over the last year as Ford's Escape and Fusion have been involved in numerous recalls.

However, if you were a general reader and glanced at these headlines you'd expect Ford to be near the top of vehicle recalls by manufacturer, but that's far from the truth. I dug deeper into past recall numbers, and was surprised at what I found.

By the numbers
I bet you'd be surprised to hear that in 2012 General Motor's (NYSE: GM  ) and Ford's vehicle recalls combined were less than Toyota's (NYSE: TM  ) or Honda's (NYSE: HMC  ) . Toyota took the top spot with 5.3 million vehicles recalled last year, which was nearly 2 million more than its Japanese rival Honda at 3.4 million. Ford and GM came in with significantly fewer recalls at 1.4 and 1.5 million, respectively. That's not an unusual result either; take a look at the graph below for cumulative recalls over the last three years:

Involved in Ford's recent recall of 465,000 vehicles are the 2013 Explorer, Taurus, Flex, and Fusion as well as the Lincoln MKS, MKT, and MKZ models. According to Detroit News, Ford received about 600 complaints of fuel leaks by the end of March. With the leaks a potential cause of fires, there's no doubt that this is an important issue to fix proactively, before a mandated recall, as Ford is doing. 

To help put the number of recalled vehicles in perspective, here is another recent recall for comparison. In January, Toyota recalled 1.29 million vehicles for two defects. Over 907,000, mostly Corolla models, were recalled for faulty air bags and 385,000 were recalled for defective wipers. While I'm sure the wiper issue won't cause uproar, Toyota had another string of airbag recalls in April where it had to hunt down an additional 170,000 vehicles for defective airbags.

Consumers obviously care about quality and recall issues, and it will take time for Detroit automakers to earn back the public's trust after years of poor-quality vehicles. By the same reasoning, we can't expect people to forget years of high-quality imports even though the last few years have been rough for Toyota and Honda. One thing is for sure: Ford and GM are making better vehicles than they were before the recession, and that's been proven by significantly lower recall numbers and increasing market share.

In addition to the lowered recall numbers lately, Ford is also handling these recalls extremely well. At the consumer level, it's almost gone unnoticed as Ford has voluntarily recalled this last batch of vehicles, notified the customers promptly, and offered to repair them free of charge.

That's largely why consumers have shrugged off the recall headlines while shopping at the nearest Ford dealership. For proof of that, the Fusion and Escape have combined for multiple recalls yet have set four straight months of record sales.

Bottom line
As mentioned earlier, last year Ford recalled 1.4 million vehicles and so far this year it's recalled a little over 700,000. Only time will tell how the rest of the year plays out with recalls, but Ford's CEO Alan Mulally said that the automaker was focused on quality and that Ford has learned something form each recall.

As long as that last statement holds true, and Ford continues to deal with issues quickly and effectively, it won't stir up much more than a headline or two. The truth is that Ford and GM aren't living up to the old stereotypes of making poor-quality vehicles that results in massive recalls – and that's a welcome headline for investors and consumers alike. 

If you're concerned that Ford's turnaround has run its course, relax – there's good reason to think that the Blue Oval still has big growth opportunities ahead. We've outlined those opportunities in detail, in the Fool's premium Ford research service. If you're looking for some freshly updated guidance to Ford's prospects in coming years, you've come to the right place – click here to get started now.


Read/Post Comments (5) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 04, 2013, at 2:08 PM, Marko22 wrote:

    I'd rather have a Toyota recall vs

    the far more frequent repair bills of

    Ford and GM.

  • Report this Comment On June 04, 2013, at 2:35 PM, AmericanFirst wrote:

    Marko22,

    I know, that's why Toyota's market share is down -01% April Ytd. and Ford and GM up .09%, .05% respectively, while Ford was #1 in customer loyalty in 2012 per J.D. Powers.

  • Report this Comment On June 04, 2013, at 2:53 PM, ponchoman49 wrote:

    Yup that's right Toyota has had a record number of recalls and there recent products reflect a downgrade in quality. My Neighbor's Camry spends more time in the shop and being recalled than in her driveway. I asked her why she bought it. Her response- It's the "in" car to buy and i see them all over the place. I told her that Chevy's Citation was the "in" car back in 1980 and we all know what happened with that fiasco. If people spent more time actually researching there purchases instead of going with the "in" choice think how much better off they would be.

  • Report this Comment On June 04, 2013, at 4:02 PM, mistacy wrote:

    I cant believe how dumb consumers can be. To buy a $25,000 product because it is the "in" thing to do is not only dumb but financially irresponsible.

    My first hand experience with a recall:

    I bought a brand new 2009 Nissan Altima & kept it for 3 years. Decided to change for newer car last July & went for the newly designed, new engine 2013 Nissan Altima. I love the Altima. The new one is great. However, there was an obvious issue when slowing down to almost a stop, with the engine shaking violently. I took it in to the dealer service dept as I have for the last 4 years. After 2 days of tests, they called me & said there was nothing wrong with the car. I told them yes there is, you just haven't been able to identify it. They looked at me as if I were mad. Sure enough, 3 weeks later, I get a recall notice to update a software responsible for the belt adjustment which was the culprit for the shaking. The recall description of the issue, was exactly what I had told the service department. I was fuming & couldn't wait to go back to the service department. I went there with a letter for the service manager, & sit down with him an hour to discuss the massive hole they have in their system. If you don't see what I am talking about let me explain:

    1- I took the car with an issue for service.

    2- Service dept found nothing wrong with the car.

    3- I get a letter from Nissan corp that there is a recall for that very same issue.

    4- I was the one informing the service department of the recall & telling them about the issue.

    Needless to say, my car was the first car they implemented the software upgrade taking care of the issue.

    My point here is that a company which recalls

    its cars in for service is commandable over

    a company who doesn't let its service departments know about issues leading to recall &

    thus leaves the customers in the dark.

    Bravo Ford,

    Your system works & your products are getting better.

    Keep up the good work.

  • Report this Comment On June 04, 2013, at 6:00 PM, whyaduck1128 wrote:

    mistacy,

    I think the word you meant to use was "commendable". "Commandable" makes me think of henpecked husbands.

    My recall story--

    If you think the Citation had problems, you should have been around less than a decade earlier for GM's "This Is The Answer" car of the day, the infamous Chevy Vega. A neighbor's kid had one, and it wore out a path from their driveway to the dealership (which was less than 2 miles away). Recall after recall, problem after problem. Her father finally refused to give her rides back from the dealership ("you wanted it, you got it, you deal with it"), so she asked me to help. I followed her, intending to drive her back, and ON THE WAY TO THE DEALERSHIP FOR THAT PARTICULAR ENGINE RECALL, WHILE WAITING TO MAKE THE LEFT TURN INTO THE SERVICE PARKING LOT, the engine blew up. Literally. There were parts on the road and dents in the hood made from underneath. I got some of the service techs to help me PUSH it into the parking area.

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