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Ford Recalls for Fuel Tank Leak

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Ford Motor Co. (F - Analyst Report) revealed that it would recall 3,500 units of 2012 Ford Taurus and the 2012 Lincoln MKS sedans as well as the 2013 Ford Explorer sport utility vehicle (SUV) in order to fix their fuel tanks that can leak after a crash. More than 3,000 units of the vehicles will be recalled in the U.S.

Ford manufactured the recalled vehicles at its Chicago assembly plant. The company built Taurus and MKS models between Jul 2011 and Jan 2012 and the Explorer SUV in Mar 2012.

It has been found that the fuel tanks in the vehicles are equipped with an improperly molded seam. So far, Ford received six reports of tanks with a fuel odor or leak due to the problem. However, the automaker is not aware of any accidents or injuries associated with it.

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. Last year, the Transportation Department of U.S. slapped a fine of $17.35 million on Toyota due to late response regarding a defect in its vehicles to safety regulators as well as late recall of those vehicles.

According to the department, it was the maximum allowable fine under the law for not initiating a recall in a timely manner. The latest fine adds to $48.4 million imposed by the U.S. government on the company in 2010 due to a late recall of millions of defective vehicles.

Last month, Ford announced plans to recall 7,150 vehicles manufactured in November last year due to a problem with the child lock on the left rear door. About 5,650 vehicles will be recalled in the U.S. The recall involved redesigned 2013 Ford Escape crossover, which has been recalled multiple times last year.

Recently, General Motors Company (GM - Analyst Report) also announced plans to recall 33,700 units of Buick LaCrosse sedans and Cadillac SRX crossover vehicles globally from the 2013 model year in order to fix a software glitch that could lead to a crash. General Motors will recall 26,582 vehicles in the U.S. and the remaining vehicles in Canada, Mexico, the Middle East and China.
    
Ford, a Zacks Rank #3 (Hold) stock, posted a robust 55.0% rise in earnings per share to 31 cents in the fourth quarter of 2012 from 20 cents in the same quarter of 2011 (all excluding special items). With this, the company has beaten the Zacks Consensus Estimate of 26 cents.

Ford’s fourth-quarter pre-tax profit of $1.7 billion was the highest in a decade. Meanwhile, net profit surged 55.7% to $1.2 billion from $797 million a year ago. Thanks to the impressive North American results and, to some extent, solid improvements in Asia Pacific Africa operations.

While we remain on the sidelines about Ford, stocks from the same industry that warrant a look include Visteon Corp. (VC - Snapshot Report) with a Zacks Rank #1 (Strong Buy).
 

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