Bloomberg News

Ford Says Fixing Recalled 2013 Models Won’t Hurt Finances

December 10, 2012

Ford Motor Co. (F:US), beset by recalls of two of its best-selling models, said a repair to its 1.6-liter EcoBoost engine on the Escape sport-utility vehicle and Fusion sedan won’t have a negative impact on its financial results.

“It will have no material impact,” Raj Nair, the Dearborn, Michigan-based automaker’s product development chief, said today in a phone interview. He declined to give a cost for the repairs. “It’s covered by what we have in the warranty reserves.”

Ford said today it found a solution to an overheating issue that could cause engine fires on 2013 Escape and Fusion models equipped with the 1.6-liter engine, featuring Ford’s fuel-saving EcoBoost technology. On Nov. 30, the automaker recalled 73,320 Escape models and about 19,000 Fusions equipped with the engine. The problem resulted in 13 engine fires, Ford has said.

Ford recalled the Fusion a second time last week to replace headlights that could become defective. The Escape has been the subject of four recalls. Nair said repeated recalls can have an impact on customer satisfaction.

“It’s obviously not a positive impact,” Nair said. “But we’re committed that if we see issues we’re going to react to them. That’s our responsibility.”

Loaner Cars

Dealers next week will begin installing software updates in the cooling system of the 1.6-liter engine on SE and SEL models of the 2013 Escape and 2013 Fusion, Ford said. About 17,000 owners who have already brought in their cars for repair have been given free loaner cars, said Said Deep, a Ford spokesman.

The Fusion, Ford’s second best-selling car, has seen U.S. sales fall 2 percent this year to 221,980. Sales for the Escape, Ford’s top-selling SUV, have risen 5.3 percent through November this year to 240,877, according to researcher Autodata Corp.

Ford hasn’t found similar problems in other EcoBoost engines, Nair said. The 1.6-liter engine in the U.S. versions of the Escape and Fusion has electronic and mechanical controls governing the cooling system that could get “out of sync” when the engine overheats, potentially leading to a fire, Nair said.

“We don’t see this issue in our other EcoBoost engines and we don’t see it in the 1.6 EcoBoost in Europe because of its cooling-system differences,” Nair said. “Clearly, we’ve had an issue with this engine. So we will use it to go update our modeling, update our system-design standards and update the way we test to prevent this in the future.”

Missing Targets

Ford reported last year and this that it has not been meeting targets to improve quality, one of the cornerstones of Chief Executive Officer Alan Mulally’s turnaround plan for the automaker. Many of the quality setbacks have been driven by Ford’s touchscreen dashboard controls and voice-activated phone and entertainment system, which have been criticized for performing poorly and distracting drivers. A fuel-saving dual- clutch transmission also has received customer complaints.

Ford’s namesake brand fell seven spots to second-to-last place in Consumer Reports’ annual auto-reliability survey in October. The Ford brand fell to 27th this year in Westlake Village, California-based J.D. Power & Associates’ new-car quality survey, from fifth two years ago.

“We’re making a concerted effort on focusing on quality and improving quality,” Nair said. “Being on the forefront of the technologies and offering a high penetration of voice control and a high penetration of connectivity, is going to have us at the forefront of customer feedback. You’re not going to get complaints on voice control if you don’t have voice control.”

Ford slipped 0.1 percent to $11.47 at the close in New York. The shares have gained 6.6 percent this year.

To contact the reporter on this story: Keith Naughton in Southfield, Michigan, at knaughton3@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net


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  • F
    (Ford Motor Co)
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