More Recall Troubles

It seems that every day another recall is in the news. Well, that perception rings true today. Ford has issued two new recalls for its new generation of Escape, bringing the total for just this generation up to 10. These new recalls will affect about 700,000 vehicles total, about 600,000 of them being in the United States.

The 2013 Ford Escape, one of the vehicles being recalled.

The 2013 Ford Escape, one of the vehicles being recalled.

One recall deals with a software glitch in the airbag system, which may cause a delay in deployment of the side airbag systems, increasing the chance of an injury in the event of an accident requiring the deployment of these airbags. This issue has already been resolved, and dealerships have already been given the software patch to fix it.

The second recall addresses a door latch issue. Failure of this device can make the door difficult to close, and may even result in the door opening during operation of the vehicle. This is a physical defect, but one that dealerships should nonetheless be able to deal with.

Customers of applicable vehicles will be notified by Ford and their dealerships this month, and both issues will be handled simultaneously by dealerships across the country.

This is the tenth time that the current generation of vehicle has been recalled, but certainly not the most serious. As Automotive News reports, “in 2012, Ford cited a fuel line problem in the new Escape that could cause an engine fire. In that case, Ford took the unusual action of telling owners to stop driving the vehicle immediately.”

Continued recalls of the vehicle may be significantly impacting sales. While the Escape is Ford’s third best selling vehicle, it has taken a hit recently, with sales in April dropping by 3%. Perceptions of unreliability may affect the brand in future sales as well.

The recall had immediate effects on the company’s stock. As news of the recall broke, the price dropped, and closed 0.25% below the opening. This drop is certainly not substantial enough to cause any major concern, but it will be interesting to see if the trend continues on Monday after the opening bell at the NYSE.

Ford's stock price on Friday. Noticeable drop after news of the recalled dropped.

Ford’s stock price on Friday. Noticeable drop after news of the recalled dropped.

Ford announced that it has not received any notification of any injuries or accidents that were a result of these defects, so this certainly appears a precautionary tale. Of course, if Ford had not addressed these issues, they could have very well turned into a serious threat to public safety, so Ford is certainly not issuing this recall purely out of good will.

As we learned this term, Ford receives all these parts from different suppliers, so going forward, it will be interesting to see how Ford alters their contracts with the suppliers of the faulty systems.

– Zac Durkin

Sources: http://www.autonews.com/article/20140509/OEM11/140509798/0?cciid=internal-anhome-mostright

2 comments to More Recall Troubles

  • mayolj16

    I feel that the large amounts of recalls we see pretty much every day now are a result of what happened with GM. It is true that Ford is not the one making these parts, but they are responsible for the software (in the case of the airbags), and for putting everything together (for the case of the door latch), making them responsible for the different failures. In these cases Ford could ask the tier 1 suppliers to make changes to the parts to work better, but not blame them for the malfunctioning.

  • Last year Toyota had more recalls than anyone else – and everyone had at least one recall. The complexity of cars is one underlying reason, to which the pace of technical change (and hence new components) and the challenge of debugging software both contribute.
     
    Impressionistically every car is likely to be recalled once (I’ve not checked data). Is this a system run amok, or are these necessary? – how could we as economists contribute to that discussion? In addition, as we heard from UMTRI and elsewhere, warnings that are too frequent eventually get ignored. With multiple recalls, often for seemingly trivial things, people will start ignoring them. So that’s another reason to wonder whether there are too many recalls.