Ford Fixes Software in Latest Recall - Analyst Blog

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Ford Motor Co. ( F ) has identified the main reason of engine overheating problem in its latest recall of 2013 SE and SEL models of redesigned Escape SUVs and Fusion midsize sedans that are equipped with 1.6-liter turbocharged engines.

The company has revealed that the problem was mainly caused by a software glitch in the engine cooling system, which was supposed to handle a loss of pressure under certain conditions that could lead to vehicle fire while the engine is running. As a result, the company has decided to update the software in the affected vehicles.

On November 30, Ford announced plans to recall 89,153 vehicles in the U.S. and Canada that include 73,320 units of Escape and 15,833 units of Fusion. The company has received reports of 12 fires in Escapes and one in a Fusion. However, none has been injured due to the problem till date.

Ford plans to deliver the cooling software update to its customers through its dealers early next week. The company has advised the customers to contact its dealers for a free replacement vehicle until the software is updated.

The redesigned Escape went on sale last spring with a price tag of $22,470 and came under the scanner of safety regulators several times that indicate quality problems in manufacturing. However, Ford has a different take on the issue highlighting how fast it is resolving the safety issue of the vehicles.

In July, Ford had recalled 11,500 Escape SUVs for fixing fuel lines leak that can cause fires. In the same month, the company had said that it would recall 8,266 units of the SUV in order to fix their improperly installed carpet padding that could cause braking failures. In September, it again recalled 7,600 units of Escape in order to fix coolant leaks that can cause engines to overheat and may lead to fire.

Apart from the redesigned version, Ford had also recalled the prior model of Escape in late July. The automaker had recalled 485,000 units of old Escapes in the month due to sticking gas pedals that can cause crashes.

Year-to-date, Ford has sold nearly 220,000 units of Escape and 207,000 units of Fusions, according to Autodata Corp. The figures include both the old and new models having different engines.

Automotive safety recalls were brought into focus by media after Toyota Motors ' ( TM ) announcement of the largest-ever global recall of 3.8 million vehicles in September 2009, triggered by a high-speed crash that killed 4 members of a family.

Later on, a string of recalls has led Toyota to face numerous personal injury and wrongful death lawsuits in federal courts. The Transportation Department of U.S. also imposed a fine of $48.4 million on the company due to late recall of millions of defective vehicles.

Ford, a Zacks #3 Rank (Hold) stock, posted a 17.6% rise in earnings per share to 40 cents in the third quarter of the year from 34 cents a year ago, driven by impressive results in its North American operation and, to some extent, its Asian operation. With this, the company has also beaten the Zacks Consensus Estimate by 10 cents per share. Total profit rose 15.6% to $1.6 billion from $1.4 billion a year ago.

However, total revenue in the quarter slid 3.0% to $32.1 billion due to lower revenues in South America, Europe and Financial Services operations that offset the marginal improvement in revenues in North America and Asia. However, revenues were higher than the Zacks Consensus Estimate of $31.0 billion for the quarter.



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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: F , TM

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