Ford’s $1.7 Billion Problem

Ford had net income of $638 million in its most recently completed quarter. It just lost a case which involved the rollover of a F-250 that killed two people in 2014. The cost of the verdict was $1.7 billion in punitive damages. Of course, Ford will appeal the decision, and the sum could come down sharply.

The wreck coverage of it does reinforce what has become Ford’s Achilles’ heel today. The quality of the company’s products has been questioned more and more often. A long story in The Wall Street Journal attacked Ford’s quality record. It was titled “At Ford, Quality Is Now Problem 1.” The title was overly cute, but it conveyed a barrier Ford could face for years, as it tries to transform itself from a gas powered vehicle manufacturer to a leader in the EV marketplace.

What runs in the headlines of major media counts. People often make buying decisions on what they read, both in the media and in car research data. Ford’s sales have risen recently. But, the trend, which defies the industry’s doldrums, needs to continue is an ultra competitive global vehicle market.

Ford’s advantage in the EV race is the Ford-150 Lightning. The gas powered version of the full size pickup has been the top selling vehicle in America for four decades. This gives Ford an installed customer base of millions of owners. If only few of them “go electric” when they buy an F-150, Ford will sell hundreds of thousands of the new version.

Ford faces a second and third headwind which has plagued all car companies. Component deliveries have been slowed by supply chain issues. Additionally, the cost of battery components has forced Ford to raise the price on the F-150 Lighting, which could put it out of the reach of some prospective buyers.

Supply chain problems, however, are not what Ford management needs to overcome. The company inhabits a sector where brands like Toyota have built sales on quality reputation. Ford doesn’t have any chance to leverage that.

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