Ford Escape on Fire Again

Ford Motor Co. (F - Analyst Report) plans to recall 7,600 units of its recently launched Escape compact sport-utility vehicles (SUVs) in order to fix coolant leaks that can cause engines to overheat and may lead to fire. The recall covers Escapes from the 2013 model year equipped with 1.6-liter four-cylinder engines.

The automaker noticed that coolant leaks could occur due to engine plugs that may not have been installed properly. As a result, they can fall out while the motor is running.

The engines were manufactured between October 5, 2011 and August 31, 2012 at the company’s plant in England. According to Ford spokeswoman Marcey Zwiebel, about 2,000 of the recalled Escapes are not yet sold and still on dealer lots.

Ford stated that it will repair the vehicles free of charge. The company’s dealers will add sealant to the metal plugs and insert a secondary cover over them so that they don’t fall out causing leakage.

The redesigned Escape SUVs are the company’s second-best selling vehicle after F-Series trucks. Last month, the vehicle saw its best August ever with sales of 28,188 units, a 37% increase from the same month prior year.

This is the third recall of Ford’s new Escape in less than 2 months, 2 of them related to problems causing fire. In July, the company recalled 11,500 Escapes for fixing fuel lines leak that can cause fires. In the same month, the company said it would recall 8,266 units of the SUV in order to fix their improperly installed carpet padding that can cause braking failures.

Apart from the redesigned version, Ford also recalled the prior model of Escape in late July. The automaker recalled 485,000 units of old Escapes in the month due to sticking gas pedals that can cause crashes.

Automotive safety recalls were brought into focus by media after Toyota Motors’ (TM - Analyst Report) announcement of the largest-ever global recall of 3.8 million vehicles in September 2009, triggered by a high-speed crash that killed 4 members of a family.

Later on, a string of recalls has led Toyota to face numerous personal injury and wrongful death lawsuits in federal courts. The Transportation Department of U.S. also imposed a fine of $48.4 million on the company due to late recall of millions of defective vehicles.

Ford, a Zacks #3 Rank (Hold) stock, posted a 39% fall in profits of $1.20 billion or 30 cents per share in the second quarter of the year from $1.98 billion or 49 cents in the corresponding quarter of 2011 due to lower operating results in all the regions except North America. However, the company’s profits were higher than the Zacks Consensus Estimate of 28 cents per share.

Revenues in the quarter dipped 6% to $33.3 billion, due to the same factors mentioned above. However, it exceeded the Zacks Consensus Estimate of $32.0 billion. In the first half of the year, Ford’s U.S. total market share was 15.4% in the U.S. and 8.1% in Europe.

For 2012, Ford anticipates market share in the U.S. and Europe to be lower than 16.5% and 8.3%, respectively, in 2011. It also expects the overall pre-tax operating profit to be lower than 2011 compared with the prior guidance of tallying. Operating margin in the Automotive segment is anticipated to be equal or lower rather than the prior guidance of improve over 5.4% in 2011.