Ford Recalls Fiesta to Fix Airbags

Ford Motor Co. ( F - Analyst Report ) plans to recall 262,000 units of 2011-2013 model year Fiesta subcompacts in the U.S., Canada, Mexico and South America in order to upgrade their passenger side curtain airbag system. As many as 154,604 Fiestas will be recalled in the U.S., while the rest will be recalled in Canada, Mexico and South America.

Although the airbag system in the vehicles meets federal safety standards, it has a deployment problem in certain crashes if the right rear seat is unoccupied. This peculiar feature of the airbag system will increase the risk of an injury to rear seat passengers in case of a crash. The feature is not even mentioned in the vehicle owner’s manual, according to the National Highway Traffic Safety Administration.

As a result, the company has decided to reprogram the vehicle’s software free of charge to make sure the passenger-side curtain airbag deploys even when the right rear seat is empty. This upgrade will also make the airbag function in line with the description in the owner’s manual.

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.

Few days back, Toyota made headlines again by announcing its massive recall of 7.43 million vehicles worldwide that include more than a dozen models manufactured between 2005 and 2010. The automaker needs to fix faulty power window switches in the vehicles that can cause fire because they didn’t have grease applied properly during production.

About a month ago, Ford recalled 5,500 units of midsized sports utility vehicles (SUVs), Edge, in order to fix their defective fuel lines that could potentially cause fire. The recall included vehicles that are equipped with 2-liter engines and manufactured between September 2, 2010, and October 31, 2011.

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 then the prior guidance of improve over 5.4% in 2011.