Stubborn warranty costs push down Ford's 2Q net profits, causing stock plunge in after-hours trading
Ford Motor Co.’s second-quarter net income fell 4.7% from a year ago as the company’s combustion engine unit saw pretax profits decline due to stubbornly high warranty costs
DETROIT — In October of 2020, Ford's then-new CEO Jim Farley said the company was working to cut warranty costs after glitch-prone small-car transmissions hit the automaker's bottom line.
Nearly four years later, warranty costs are still vexing the nation's second-largest automaker and lopping billions off of its profits.
Ford Motor Co. reported Wednesday that its second-quarter net income fell 4.7% from a year ago as its combustion-engine unit posted a pretax loss due to rising warranty and recall costs.
The profit drop and lingering quality problems knocked net income to $1.83 billion from April through June, compared with $1.92 billion a year ago. It caused Ford to badly miss Wall Street estimates for adjusted earnings per share, touching off a stock plunge in after-hours trading.
Warranty and recall costs last quarter, the company said, totaled $2.3 billion, $800 million more than the first quarter and $700 million more than a year ago.
At its investor day event two years ago, Farley said Ford had made progress on quality of new vehicles as well as initial quality after vehicles were sold. “However we are not satisfied at all with our quality performance, including our recalls and customer satisfaction efforts, which we need to quickly accelerate,” he said at the time.
Chief Financial Officer John Lawler told reporters Wednesday that Ford is making progress on quality. The second-quarter costs were attributed to older vehicles from the 2021 model year and earlier.
Farley told analysts that improvements are showing up in internal data, and in
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