This has already been a fairly tense year for investors in Ford Motor Company (NYSE:F), as the automaker launched the new 2015 F-150, which replaced steel body panels with aluminum counterparts. Investors have been glued to every conference call trying to pick up on any insight regarding a delayed or stalled launch, hiccup in production, or any other problem that could prove to be a speed bump for Ford's best-selling product.
Thus far, things have gone pretty smoothly, but it was recently announced that the Insurance Institute for Highway Safety, or IIHS, is going to retest certain models of the 2015 F-150. This retest comes at a critical point in time, as Ford is busy convincing consumers and investors its 2015 F-150 is as safe and durable with its aluminum panels as its steel predecessor was.
IIHS's retest, on the surface, seems like it could be a big speed bump for Ford. Let's look into the details and see if there's any reason for investor concern.
What's the deal?
IIHS has historically only tested Ford's best-selling SuperCrew model, which represents roughly 70% of total F-150 sales -- the SuperCab model represents 25% of F-150 sales, while the Regular Cab accounts for the last 5% of sales. The problem with IIHS only testing the SuperCrew model is that Ford adds extra safety equipment to that model, but not the SuperCab or Regular Cab F-150s, according to Automotive News.
Now that IIHS is testing the other two F-150 models (it will similarly test additional models for other automakers beginning next year) it's pushing back its safety report of the 2015 F-150 until at least July, according to an IIHS spokesman. It's a report that investors will be waiting for, as it's a special single-vehicle safety report that will reveal the performance of the 2015 F-150's new aluminum body.
What's the big deal, and how serious is this for Ford and its investors?
The graph below emphasizes an irregular pattern for Ford's profits this year due to the constrained production and sales of the 2015 F-150. When production hits full capacity this quarter, Ford expects that pent-up demand to boost its profits for the back half of the year.
The F-150 is America's best-selling truck, and it is Ford's most profitable vehicle -- as well as its highest-volume-selling vehicle -- and its impact on the underlying business success can't be understated. If the report turns out to be negative, it could influence consumers looking for a new truck with optimal safety to look at competing trucks instead.
However, investors shouldn't be too worried that the IIHS report will be negative.
Even though the IIHS is just now testing all three 2015 F-150 models, the National Highway Traffic Safety Administration, or NHTSA, already tested all three models this spring. The results were positive and all three models scored five stars, the federal agency's highest rating. The positive results are something that Ford has been using in its marketing campaign for its best-selling truck.
Oftentimes the best way to do something is to simply do it right the first time. Hopefully, Ford took this approach with its most important and most profitable vehicle; if so, investors have nothing to worry about and IIHS can test the truck as much as it wants to.