2014 will go down in the record books as the year with more vehicle recalls in the U.S. than any other, and it will likely stay atop the annual rankings for some time -- at least, we hope. While Ford Motor Company (NYSE:F) has dodged the massive and tragic recalls that have plagued its crosstown rival General Motors this year, one of Ford's best-selling vehicles is being recalled for an eye-popping 12th time. Let's take a look at the newest Ford Escape recall, and see if it's anything for consumers to worry about -- and whether or not investors should expect a decline in Escape sales as a result.
What's the big deal?
Ford's recalling roughly 850,000 Escape, C-Max, Fusion, and Lincoln MKZ vehicles due to an electrical flaw that could potentially cause airbags and seat belts to malfunction in the event of a crash. Also, recently, the 2013 Escape model had 159,395 vehicles recalled due to the turbocharged 2-liter EcoBoost potentially losing power or stalling, according to Ford. The potential problems arise from an engine wiring harness that may not have been sufficiently compressed.
Of course, Ford hopes these recalls won't have any negative impact on sales, as the Escape is currently the automaker's third-best-selling vehicle in the United States, where it drives the majority of its profits.
Why it matters for Ford
As you can see in the graph above, the larger Explorer has witnessed inconsistent and roller-coaster-like sales for more than a decade, while the smaller Escape crossover has consistently surged higher. The Escape, along with the Fusion, has a chance to do something no other Ford vehicle besides the F-Series has done in a decade: break 300,000 sales for the year.
Ford's Escape is the company's best-selling utility vehicle and it accounts for nearly half of Ford's utility segment sales. The Escape also accounts for nearly 13% of Ford brand's overall sales through August. It's also the United States' second-best-selling crossover vehicle and ranks 11th in overall sales for the industry through August.
Furthermore, the Escape's premium Titanium trim and EcoBoost options are very popular and help drive average transaction prices and margins higher -- important aspects for consumer satisfaction as well as Ford and its investors.
Put simply: The Escape is important for Ford, and if recalls dampen sales for this important vehicle, it's a serious problem.
Time to worry?
While the Escape has been one of the most often recalled vehicles since its 2013 redesign, it's worth noting that none of the recalls have been serious -- ranging from door handle issues to loosened seat backs. Furthermore, no crashes or injuries have been reported as a result of the Escape's recent stalling problems that prompted this latest recall.
Ford's recalls are a far cry from those involving General Motors' faulty ignition switch that resulted in tragic deaths. In fact, General Motors has recalled over 25 million vehicles in the United States this year alone, which was enough to set the annual record for the entire automotive industry's recall total by itself. However, even General Motors' serious recalls have failed to dampen the company's sales this year. In fact, sales are up 2.8% at GM through August, while Ford's are down nearly 1%.
While 11 recalls for one of Ford's most popular vehicles isn't great news, it isn't as bad as it seems, either. Most of these recalls are less serious, and honestly, recalls are a part of the automotive business and they are more common when a vehicle is only a couple of years into its redesign, as the Escape is.
Investors shouldn't worry about a decline in Escape sales, either. Expect Escape sales to continue surging in the U.S., as well as in China. Consumers will likely continue driving the crossover off the lots in droves, which is great news as Ford continues on its impressive rebound from near bankruptcy just a few years ago.
Daniel Miller owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.