Ford Motor Co.
) plans to recall 262,000 units of 2011-2013 model year Fiesta
subcompacts in the U.S., Canada, Mexico and South America in order
to upgrade their passenger side curtain airbag system. As many as
154,604 Fiestas will be recalled in the U.S., while the rest will
be recalled in Canada, Mexico and South America.
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Although the airbag system in the vehicles meets federal safety
standards, it has a deployment problem in certain crashes if the
right rear seat is unoccupied. This peculiar feature of the airbag
system will increase the risk of an injury to rear seat passengers
in case of a crash. The feature is not even mentioned in the
vehicle owner's manual, according to the National Highway Traffic
As a result, the company has decided to reprogram the vehicle's
software free of charge to make sure the passenger-side curtain
airbag deploys even when the right rear seat is empty. This upgrade
will also make the airbag function in line with the description in
the owner's manual.
Automotive safety recalls were brought into focus by media after
) 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.
Few days back, Toyota made headlines again by announcing its
massive recall of 7.43 million vehicles worldwide that include more
than a dozen models manufactured between 2005 and 2010. The
automaker needs to fix faulty power window switches in the vehicles
that can cause fire because they didn't have grease applied
properly during production.
About a month ago, Ford recalled 5,500 units of midsized sports
utility vehicles (SUVs), Edge, in order to fix their defective fuel
lines that could potentially cause fire. The recall included
vehicles that are equipped with 2-liter engines and manufactured
between September 2, 2010, and October 31, 2011.
Ford, a Zacks #3 Rank (Hold) stock, posted a 39% fall in profits of
$1.20 billion or 30 cents per share in the second quarter of the
year from $1.98 billion or 49 cents in the corresponding quarter of
2011 due to lower operating results in all the regions except North
America. However, the company's profits were higher than the Zacks
Consensus Estimate of 28 cents per share.
Revenues in the quarter dipped 6% to $33.3 billion, due to the same
factors mentioned above. However, it exceeded the Zacks Consensus
Estimate of $32.0 billion. In the first half of the year, Ford's
U.S. total market share was 15.4% in the U.S. and 8.1% in Europe.
For 2012, Ford anticipates market share in the U.S. and Europe to
be lower than 16.5% and 8.3%, respectively in 2011. It also expects
the overall pre-tax operating profit to be lower than 2011 compared
with the prior guidance of tallying. Operating margin in the
Automotive segment is anticipated to be equal or lower rather then
the prior guidance of improve over 5.4% in 2011.