Ford Recalls for Defective Wheels - Analyst Blog

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Ford Motor Co. ( F ) will recall 128,616 units of Fusion and Mercury Milan sedans in order to fix the defective steel wheels in the vehicles. The automaker has decided to replace lug nuts on all four wheels and inspect rear-wheel disc brakes surfaces. It may also replace the disc brakes if necessary for some of the sedans with model years 2010 and 2011.

The defective 17-inch steel wheels of the recalled vehicles were built at a plant in Hermosillo, Mexico in 2009 and 2010. They were supplied by Hayes Lemmerz International Inc, based in Northville, Michigan, while the brakes were supplied by Brembo North America Inc., based in Plymouth, Michigan.

The defect was first detected by National Highway Traffic Safety Administration (NHTSA) when it began investigation on January 21 after receiving 29 owner complaints related to the problem, including four cases in which wheels had fallen off.

NHTSA stated that wheel studs may get fractured while driving, resulting in vibration and separation of the wheels, thereby increasing the risk of a crash. Ford will start notifying the owners from the week beginning on January 24, 2012.

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.

In August, Ford recalled 1.1 million units of its popular F-150, F-250 and Lincoln Blackwood pickup trucks due to a problem with their gas tanks that could catch fire. The recall included models manufactured between 1997 and 2004.

The recall was related to a probe initiated in September last year after receiving 32 consumer complaints by NHTSA. As many as 1.4 million units of F-150 pickup trucks were suspected of possibly having the same problem with the traps holding fuel tanks that can rust and break.

Ford, a Zacks #4 Rank (Sell) stock, posted a $66 million or 3.5% fall in profits to $1.85 billion in the third quarter of the year from $1.91 billion in the same quarter of prior year. However, on per share basis, earnings were 46 cents versus 48 cents a year ago, beating the Zacks Consensus Estimate of 44 cents. The decline in profits was attributable to fall in commodity prices and anticipated reductions in Financial Services results.

Total revenues in the quarter went up $4.1 billion or 14.1% to $33.1 billion. This compared with the Zacks Consensus Estimate of $29.8 billion.

Ford generated $3.0 billion of revenues in South America, up 20% from the prior year. Pre-tax operating profit in the region was $276 million compared with $241 million a year ago. The increase in profit was attributable to favorable net pricing, volume and mix, and other profits, offset partially by higher structural costs.

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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 Nasdaq, Inc.

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

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