New Ford CEO Jim Farley is tasked with righting the financial ship at the iconic automaker, a daunting task considering the fact that 2020 has been one of the most challenging years any organization has faced. Things are looking up, however, as Ford managed to beat Wall Street expectations by reporting a third-quarter profit of $2.4 billion on revenues of $37.6 billion as the CEO revealed his future plans for the automaker. Now, Farley is looking to reduce costs moving forward, a process that includes curbing warranty costs.
“Our warranty coverages in the last few years is up $1 billion to $2 billion depending on the year, and that is not okay,” Farley said during a recent analyst call. “So, although it moderated in the (third) quarter and we have taken a lot of actions on craftsmanship, long-term durability, we have a much bigger ambition to improve the quality of our vehicles. We have taken a lot of countermeasures. They will take time.”
“We’re moving with urgency to turn around our automotive operations, improve our quality, reduce our cost, and accelerate the restructuring of underperforming businesses,” Farley continued. “And third, we are going to grow again, but in the right areas – allocating more capital, more resources, more talent to our very strongest businesses, and vehicle franchises.”
Farley’s emphasis on lowering warranty costs is particularly important as the automaker prepares to launch a host of new products including the 2021 Ford F-150, 2021 Ford Mustang Mach-E, 2021 Ford Bronco, and 2021 Ford Bronco Sport.
“These are fantastic opportunities for us on the top line for the next many years to come,” Farley said, adding that Ford’s North American profit margins could top 10 percent.
We’ll have much more on Jim Farley’s plans to right the financial ship at Ford very soon, so be sure and subscribe to Ford Authority for the latest Ford business news  and around-the-clock Ford news coverage.
Comments
Jim Farley needs to focus on Sedans for Ford and Lincoln brand
On the contrary, he needs to focus on profitability and growth. It’s just not there for sedans these days. At some point in the future, the pendulum may swing back, especially if energy prices surge. But for now, SUVs and trucks are the products that drive the top and bottom lines.
My Escape has had a roof leak since purchase. Ford does not back their vehicles!! Manfacturing defects are the responsibility of the owner!! I plan on buying more vehicles in my lifetime and guarantee none will be Fix Or Repair Daily!! Ford sells garbage and doesn’t back their product!! I am a CAW member!!
I can attest to their poor quality. The 10 speed automatic on my 2020 Mustang was a mess. Harsh jerky shifts and a huge jerk when going into reverse. Worst automatic I’ve ever owned. Ford can’t fix it. They update the software and it’s a lot better for a few days then rapidly goes downhill again. Pathetic for a transmission they’ve been making 3 years!
Strut bearings also needed replaced at 14k miles. Rear window didn’t roll up fully. And driveline had a vibration between 50 and 70 mph. Body fits also not up to standard. I traded it off already. Done with Ford.
Thank goodness we have a genuine car guy back on top of the company. Now hold accountable the executives responsible for allowing quality to slip…yet again. What about you Bill Ford? Why did this happen under your watch? You’ve seen this before, after you cleaned things up post Jack Nasser era?
I have a 2020 Ford Explorer ST and having transmission problems also Ford is giving me the run around. I should of brought a Toyota Highlander can’t believe Ford is doing this .
I am excited by Fords future. But note quality issues. I rented a Mustang in March. Was surprised by gaps in door panels, window closing etc. And F150 interiors are Transformer plastic like. Need some detailed attention to design and quality.
The Focus and Festiva 6 speed dry clutch transmissions were a warranty mess with many owners going through multiple clutch packs, Ecoboost engine failures due to coolant leaks on the 1.6 and 1.5 liters were more than should happen. There was many fit and finish issues with the 2020 Escape and 2020 Explorer. The Explorer roundly gets poor marks for the quality of the interior in car magazines reviews. Our 2018 Edge and 2018 Ecosport had been fine though. Always buy a extended Ford ESP plan to play it save if you keep your cars a long time.
The Festiva was made in Korea by Kia. Were you referring to the Fiesta? I have 2. No issues.
My 2020 Raptor.. wish I had never bought it. The 10R80 transmission is absolute garbage. I just had a new transmission installed two days ago and a new valve body three weeks before that. It actually runs worse now.
I owned a 2018 F150 before my raptor and the drive line vibration was unbearable… I should have kept my Tundra I owned before buying Ford again.
I think that the phrase, “reducing costs” and “increasing reliability” may run counter to one another in many areas. The above examples mention a few, but as a current platform Mustang owner, the disturbing answer supposedly offered by the company as to why they opted for the MT82 6 speed manual instead of another unit like say the Tremec in the GT 350, was that they were trying to keep the base cost of the car below the Chevy Camaro.
If this in fact true, and I’m not sure it is, I would then ask one simple question…why? You have a sub-brand that is by far well above in notoriety in it’s category to any competitor in name recognition and historical mystic. Instead of worrying about beating price points of “competitors”, why not concern yourselves with make the best in category? I’m sure most would rather pay a few dollars more for the best experience, than worry about how many total units a model sells. Why not focus more on the customer experience…that’s ultimately what make the brand. Stop looking at yourselves as the “also ran”, and start looking at yourselves as the “only ran”.
I think Ford loses interest in thier customers after the sale.. complaints abound all over the internet about many of these problems and law suits have been filed but Ford seems apathetic at best in resolving these problems. I grew up on Ford and the management in recent years has been awful..
Bill Ford was the equivalent of the coaches son being quarterback even though he has a spaghetti arm and can’t learn the plays.. I’m disgusted
They finally figured out why Japanese vehicles were outselling them and that’s quality. Better quality leads to less warranty. duh Ford. What took you so long?
My sentiments exactly… dah
Build better vehicles all way around and thus reduce warranty cost. Plain & Simple!!!
I have owned Ford products most of my driving life. Only car I owned that wasn’t a Ford or Mercury was Plymouth Sundance, which was a very good car too. I currently have 2018 Taurus and haven’t experienced any issues yet. Throughout the years every care except one was an improvement over the last. That one was an 82 Granada. My 2000 Cougar went 15 years with factory installed original equipment; except break pads, tires and filters. Even the hoses and belts lasted 17 years and 210k miles. I am very surprised to read these comments about problems.
I am a very happy and satisfied 2nd owner of a 2012 Ford Escape XLT FWD with the 2.5L I4 and the 6 speed automatic. It now has 261k trouble free miles and I expect many more miles before I retire it. Only things that have ever replaced was the starter @255k miles and A/C compressor @ 215k miles. I still own and drive daily the 68 F350 CrewCab long bed pickup I learned to drive on when I 16 years old. I am now 65 years old and for my money FORD builds some of the longest lasting most dependable vehicles in the world. Ford please reach out to me I would be glad to spokesperson about Ford’s quality and even appear in a commercial!
The management team that is responsible for your 68 F350 left the company a long time ago. Today’s Ford’s management is at least 200 steps lower.
Hey Grant.. I used to feel the same way about Ford. However, buy something new ( or newer ) and then your comments may actually have some relevance to the current conversation. Did you actually read the comments or was self aggrandizement your only goal?
Can you say 2016-ish Mustang A/C and ‘deep-in-the-dash’ $2700 condenser issues?
There is hope, though. My 2018 F-150 seems like a well-designed, solid quality truck.
As with any manufacturer, quit trying to save a dime while losing a dollar.
Ford needs to change mind set within the company. The Ford managers never get to feel what it is like to have a broken down car on side of road or have to pay a months pay to get their car fixed while having to arrange other transportation to go to work. The managers all get lease cars, some get 2, these are brand new cars without any problems. They just don’t understand the pain. To fix warranty problems, have all the managers drive 10 year old Ford cars until warranty goes down. There’s the motivation you need.
Finally, An CEO interested in bringing down warranty costs. When you bring down the warranty costs. You help the company bottom profit and by producing a better vehicle. Improving the Ford image that people have when you mention Ford vehicles. As a company, you can cut costs so much where it hurts the final product. I.E. Steering wheel nut recall fiasco. How embarrassing to have a recall like that. The nut that holds the steering wheel was too skinny. Today’s vehicles cost so much the quality MUST be there or the competition will have the next sale of the customer and more after that loss. Don’t let someones else have your sales like the way the American automobile industry lost the number in sales in the full-size car sales title. If it happened once to can and will happen again.
I bought a new Ford Explorer in 2016 within 2 weeks the whole back up system went out. Supposedly the replaced the whole “motherboard.” It’s happened off and on since then but of course nothing is wrong. On top of that I have had power train problems that have had to be fixed. Last Sunday morning my transmission went out. I’m at 65,000 miles my warranty is up and I drive like an old lady so my car has never been beat on. How can I pay $38,000 and have one problem after another and hasn’t lasted a full 4 years. I WILL NEVER buy a Ford product again. I’m so sad and disappointed this happened. I saved for that car and I’m totally screwed. What a wonderful experience.
I bought a 2019 Escape, only due to Ford not having a American made sadan, First new Ford I bought, brought it to the dealer in the first month due to steering and sync issues, at least 8 times and they refused to fix the issues. I gave up. I guess this is the way CEO’s save on Warranty costs. Have their dealership not fix customer vehicles.
My first Ford vehicle would be Bronco, Ford did an excellent job and hit a home run with the vehicle exterior and their offering. How ever the interior is a different story. People are changing trims just because they did not like the interior. Most trims don’t even have interior choice. People expect more from Ford. I will buy a Bronco regardless because my trim offers an interior that works for me.
Lol lower warranty costs? Maybe if corporate would of listened to their engineers about the Focus transmission/clutch they wouldn’t be dishing out all that money. What blows my mind is that they still kept producing the same failing model from 2012 to 2016. We purchased my 17 year old daughter one in 2014. It failed under 40,000 miles. Actually we were the lucky ones we didn’t have to pay out of pocket because it was still under warranty unlike poor other customers. I LOVE when we you call corporate this is what they always say “oh I’m sorry to hear about that” I would love to see all the failing Focus’s be delivered to the Dearborn parking lot and dumped. People who buy this class of car can’t afford it to fail every 2 months. Ours failed 5 times. Which means Lemon Law in the state of CA. Shame on you Ford
Owned 15 edge w/ nosey transmission ford would do nothing. What did I do I traded for another Ford. Hope this one works out better.
Ford has no intention of reducing warranty costs by improving quality. They are simply going to go after the suppliers for warranty cost sharing, and they are going to go after the dealer service centers to do the repairs faster and cheaper.
The sad fact in this town is that it just has to make it the end of warranty. OEMs make profit on service parts.
Indeed, profitability is driven in some measure by service parts. But that assumes a long vehicle life after the warranty expires.
If warranty costs are north of $1BB (as described in the article) then Ford has a real problem that needs fixing. You may be correct that they will pass some of that to suppliers, but that’s been their strategy for more than a decade – and costs are still going up. Supplier quality is also related to OE part costs; you can engineer in long-term durability and better materials, but that affects purchasing costs. Ford’s buyers, like most OEMs are given no incentives to think in terms of costs over the vehicle life cycle.
I purchased a 2020 Ford Explorer ST, after swearing I would never buy another Ford. I regret not taking my own advice. Already had to replace a faulty sensor that turned off pretty much every enhanced driving function from Drive mode to Traction and stability control to Hill brake assist. My SYNC is really slow sometimes and can take 5 minutes from start up to switch between stereo option to the Navigation. I am all around disappointed that things Ford has had in their vehicles for years are still suffering from piss poor engineering and quality. THIS IS ABSOLUTELY MY LAST FORD!!!!
You can bring down warranty costs by improving the product, or you can bring down warranty costs by short changing the dealers on repairs made to customer vehicles. Any bets on which route JF is going to take?
If Ford wants to eliminate transmission problems, they need to stop making their own transmissions and go to an outside supplier. For the past 10 or more years, Ford has been shovelling money to GM to look over their shoulders when GM designs a new transmission. If Ford simply took the design and put it into production things might improve. But no, the Ford transmission engineers think they have a “Better Idea”, and muck up what GM designed. The result is the 10 speed they have now, that nearly everyone hates. Worst of all, either Ford transmission design has no idea why the failures are occurring or more likely are loathe to admit that they messed up. Admitting you made a mistake at Ford is a career ender.
The problem with the 2020 Explorer started in Chicago at their factory. Many of the early Explorers were built and then shipped to Detroit for repairs – right off the assembly line. It is painful to watch ongoing issues with new launches. I can’t understand why after all these years of being pummeled by Japan and Germany , Detroit can’t get quality off the line from day one.
There are two main reasons that Ford has the quality issues it does. First is labor relations between the company and the unions in some of the assembly plants. Ford and the UAW have been adversarial for ages and ages in Chicago, just as Ford and Unifor have been at each other’s throats in Oakville for ever and ever. To drill down into labor relations a bit futher, there are a couple of reasons things are as bad as they are. First Ford dictates that a particular plant has to operate within a certain budget per unit of production, be it the entire vehicle, or an engine or a transmission or even smaller componens. The budgets are razor thin at the best of times. Yes, there are extra people available at launch time, but the budgets get reduced and the extra people have to go away or the plant operates in the red and that is a death sentence for anyone in any sort of management position. So jobs get combined, not always in a good way, and until the line operators figure out how to get what they’re assigned done in the time they’re allowed, that’s a fight. Second, Ford has procedures in place to follow when they’re going through a launch. From my experience these procedures are short-cutted severely, so that problems that might have occurred while the procedures were being followed, could be fixed, they instead turn up when production starts and then all hell breaks loose trying to go back and deal with everything after the fact. So just like every story, there are two sides. Ford management is responsible for far more of the problems than the union is. No, the union isn’t blameless, but if management were concerned with more than money, all concerned would be a whole lot better off.
Sounds like this company’s swamp needs to be drained, sooner, the better.
Is Farley concentrating on reducing the number of vehicles this company is recalling? it has recalled millions since the 2012 model year.
Ford needs to focus on a NEW CEO and very soon or ALL will be lost! SAD!