Ford Recalls 1.5 Million SUVs, Investors Felt Uneasy

Ford Motor Company announced on June 12 a recall in about 1.5 million Explorer SUVs launched between 2011 and 2017. The company came up with this strategy to amend the suspension problem, which may lead to a loss of steering control.

For consumers who own the affected vehicles, it might be a big issue. There is a possibility that they will need to make an appointment and get it fixed. On the other hand, Ford investors are wondering if they also need to worry.

To illustrate, every news about the recall can have a not-so-good impact on an automaker’s stock price. But most of the time, the investors seem to unnoticed the story.

Is The Recall News a Big Deal?

Every time an automaker makes a recall, investors should know two things. First one is to research if someone has been hurt or killed as a result of the defect. Any injuries or death after a recall is automatically a severe problem. Aside from that, it is necessary to study possible costs of settlements with victims and families, also the potential of fines and other penalties. And if the news is dreadful, for sure, the automaker’s reputation will have long-lasting suffering.

And the other one is to see the value of the automaker to repair all the affected vehicles. Because a recall can be pricey even though no one is hurt. However, there is also a chance that it won’t be that expensive if the defect is in the software update or it damaged a few vehicles only. But if the damage needs a hands-on repair for a large number of cars, then the payment can turn into hundreds of millions of dollars.

The Recall of Ford

The Ford said in its press release that Explorers which are bare to regular full rear suspension articulation might suffer a fractured rear suspension toe link. And if the link crashes, the driver will have difficulty in steering the vehicle and could lead to an accident.

Furthermore, if the company wants to repair the affected Explorers, Ford needs to change the two rear suspension toe links with stronger parts. And it will require a reset in its alignment in the rear wheels. Usually, in a recall, all repairs are free of charge for every owner of the vehicle.

Now, the question is if nobody experienced an accident so far. According to Ford, no one is hurt. But there has been one incident where someone hit a curb when the toe link broke. As of now, Ford has no information about any injury related to this condition in markets included in this action. And that can be a piece of good news.

Meanwhile, there are about 1.5 million Explorers in the U.S., Canada, and Mexico. All of them needs recall and repair. And, some parts the Ford must replace will sure be expensive.

Above all, the Ford filed a Form 8-K with the Securities and Exchange Commission right after the announcement of the recall.