After facing a number of quality woes and issuing more recalls than any other automotive manufacturer over the past few years, Ford has refocused its efforts on improving initial quality. There are signs that this approach is working, but there’s also clearly much work to be done. Now, with the second quarter of the year in the proverbial rear-view mirror, the burden of quality issues is once again showing up on the automaker’s financial statements and – as a result – Ford stock, too.
According to Reuters, Ford stock tumbled 12 percent in early trading Thursday morning, hours after the automaker announced its Q2 financials. FoMoCo’s adjusted profit of 47 cents per share was far below analyst expectations of 68 cents, but perhaps a bigger concern stems from swelling warranty costs – which grew by $800 million compared to Q1 2024, which had a massive impact on profits. “Ford referenced quality problems on vehicles from the 2016 and 2021 model years, and to address these concerns, the company is shouldering a higher-than-expected warranty burden,” said financial firm Piper Sandler.
Looking ahead, Ford still expects to hit its warranty cost targets for the entirety of 2024, in spite of this massive jump. However, it’s clear that quality issues continue to take a toll on the company’s profitability, as its EBIT (earnings before taxes and interest) outlook for the entire year has actually improved for Ford Pro – from $9 billion to $10 billion – though rising warranty costs have reduced the outlook for Ford Blue, from $6.5 billion to $6 billion.
Along with tying management bonuses directly to quality, Ford has also been conducting quality checks on all of its refreshed and redesigned models prior to shipping them. That process began with the all-new 2023 Ford Super Duty – costing the automaker $1 billion to complete – though it also reportedly prevented a dozen recalls for the refreshed 2024 Ford F-150. These quality checks will likely result in delayed launches moving forward, but are already paying off, as the automaker ranked above the mass market average in J.D. Power’s most recent Initial Quality Study (IQS).
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Comments
that isnt the real answer, its because they went down the rabbit hole chasing Musk, they have aligned themselves with the current administration and this is what they get
I’m not sure non-stop warranty costs are the result of ‘chasing Musk down the rabbit hole’….
how do you think non stop warranty costs arose, look at the big picture of the rabbit hole
Yeah, it’s Tesla’s fault Ford has been building garbage lately. Ridiculous.
Ford’s engineering is still abysmal, and the company’s upper management plays a significant role in this by demanding the scummiest kind of cost-cutting, which drives down component quality and thus reliability. Beyond that, their management has utterly failed over the years to establish company-wide Deming-type processes and rulebooks to nail down ever-improving quality with every iteration of their products.
GM & Chrysler are no better.
If the D3 can’t get this core stuff right, they will continue to fall further beyond companies like Toyota with every passing year.
Do better.
If any of the three companies were serious, they’d have adopted R&D techniques of Demmings years ago.
Please ignore that last sentence and the Deming misspelling….it was meant to be deleted.
lol, going through this right now on my Shelby – known AC compressor problem has trashed the entire system so the compressor, condenser, and HVAC module are getting replaced plus whatever else is associated with it. That’s a 6k+ bill and the reason why I bought Ford’s ESP. After reading the warranty and seeing how much it costs (6k for the level of protection I purchased) all that money has evaporated for Ford.
Stop buying vehicle components on Temu Ford…
While there have been a lot of warranty issues, the key item missing from the post is that for every dollar the ICE division earned, the ModelE division lost more than dollar. ModelE’s profit margin is an abysmal -200% this year. Ford Pro’s healthy margins are keeping the company afloat.
If I did now know better I would think that Barra and Farley have a running bet on who can destroy their respective companies the quickest.
Poor engineering dept?