Ford has released good news recently, and investors have been rewarded. After it announced a sharp increase in July unit sales, the stock rose. However, The Wall Street Journal has just published a story which says Ford’s quality problems are severe, and may take years to solve.
July sales rose 36.6% to 163,942. Part of the good news was that sales of the flagship F-series pickup spiked up by 21.1% to 63,314. The F-series has been the best selling vehicle in the U.S. for over four decades.
Sales of Ford’s EVs, the key to its future, also rose, albeit in small numbers. Sales of the new F-150 Lightning, which many analysts believe is the key to Ford’s future, were 2,173. Supply chain problems have undermined Ford’s ability to deliver more. Ford’s current base of millions of F-150 owners make an extremely fertile market for sales of the new truck.
Sales of the Mustang Mach-E electronic vehicle have also been strong. They rose 74.1% in July to 4,970.
Ford’s stock has moved higher by almost 10% in the last week.
The Wall Street Journal article could not have been more damaging. Its headline read “At Ford, Quality Is Now Problem 1.” It listed case after case of manufacturing flaws and recalls.
As a sign of the depth of Ford’s problem, the Journal reported: “Last year Ford set aside more than $4 billion for warranty costs, up 76% from five years earlier. Its total warranty expenses increased about 17% from 2016 to 2021.”
Quality is among the most carefully watched information people use when they buy cars. Several companies publish widely regarded research on quality. These are led by J.D. Power and Consumer Reports. Poor quality ratings can keep people out of a manufacturer’s dealerships, and drive them to other brands.
The car industry continues to suffer from parts shortages. That has caused sharp price increases for buyers. As more cars are available, people will be able to shop for, and buy cars, quickly. Ford’s quality problems may keep it out of benefiting from the brisk increase in supply and resulting sales.
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