Zacks_Analysts' Blog : Ford Recalls New Explorers - Analyst Blog

Ford Motor Co. (F) announced that it will recall more than 1,600 units of its newly launched Explorer sports utility vehicle due to a safety problem with the second row of seats. The vehicles were manufactured between July and December 2010.

Ford stated that the seats were manufactured by Lear Corp (LEA). The seats had manual reclining mechanisms that did not meet federal safety standards. The automaker had detected the problem at its assembly plant in December and asked its dealers to stop selling the affected vehicles until they are repaired.

The redesigned Explorer was launched in late 2010. In January, the automaker saw a 70% increase in sales of the model compared with its older version a year earlier. Ford will start notifying the owners regarding the recall from February 14.

Automotive safety recalls were brought into focus by media after Toyota Motors’ (TM) announcement of the largest-ever global recall of 11 million vehicles since September 2009. The Japanese automaker’s recall was related to problems such as faulty accelerator gas pedals and slipping floor mats as well as defective braking systems.

The string of recalls has led Toyota to face numerous personal injury and wrongful death lawsuits in federal courts. The Transportation Department of U.S. has imposed $32.4 million in fines on Toyota related to two separate investigations due to the late recall of millions of defective vehicles on top of the highest-ever fine of $16.4 million paid earlier in 2010 related to the same issue.

Last week, Ford recalled about 363,000 units of its top-selling F-150 pickup trucks due to a defect with their interior door handles. In 2011 till date, the automaker has recalled more than 900,000 vehicles, including 525,000 units of its Windstar minivans due to a corrosion related problem. There have been more than nearly 600,000 vehicles recalled throughout 2010.

Ford, a Zacks #3 Rank (Hold) stock, posted a 24% fall in profit to $1.2 billion or 30 cents per share (before special items) in the fourth quarter of 2010 from $1.58 billion or 43 cents per share (before special items) in the same quarter of 2009. With this, the automaker has missed the Zacks Consensus Estimate by 19 cents per share.

The decline in profit was attributable to lower year-over-year revenues generated by the company’s automotive operations as well as the financial arm. Total revenue during the quarter ebbed 7% to $32.5 billion. However, excluding revenues from Volvo, sales improved by $1.6 billion or 5% from the fourth quarter of 2009.