Here’s Why Ford Has Been Issuing So Many Recalls For Incorrect Repairs
The recalls themselves aside, I'm wondering how a $165 million fine will fix those cars. Seems to me the consent order should be enough to provide oversight to the government's satisfaction. That fine could be better spent on the costs of the ongoing recalls and repairs. Remember, we're the ones that will pay that fine ultimately.
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I had the same thought as you but then what would propel Ford to take action
The real issue is with the quality, cost cutting and drum beat to make cheaper parts which every manufacturer does … why is Ford not doing as well as the top 5 auto manufacturers?
The real issue is with the quality, cost cutting and drum beat to make cheaper parts which every manufacturer does … why is Ford not doing as well as the top 5 auto manufacturers?
That's what the consent order is for. If they don't comply sufficiently in a set period, contempt orders or criminal proceedings against selected senior management. Holding individuals personally accountable is way more effective then the corporation as a whole. Take away a little freedom or paycheck, and they'll listen. If they still don't get the message, then fines at the corporate level could be levied to drive home the point. Again, it's the consumer that bears the cost of the fine in increased costs in the long run. Even shareholders are isolated as long as they don't do the stupid thing and sell right after the fine and subsequent hit on share price.
Neither corporate management or politicians have enough skin in the game. Probably never will, honestly. Sigh...
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Let's see how that works out.
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I was a Quality Director for a Tier I supplier to Ford, GM, and Stellantis, for over 30 years. Some of the issues I observed at assembly plants were pathetic. Part of the problem I see is today's workforce ethics. We struggled to get qualified labor that actually were willing to work as did the assembly plants. Today's workforce spends more time trying to get out of work and getting high on every break and lunch.
And can't put their Cell Phones down and actually Work.
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Of course, fines are only effective if a) they are steep enough and b) if they are only levied against a fraction of the corporations in an industry.
In this case, 'b' is true (only Ford). WRT 'a' -- "According to Ford Motor Company's 2024 financial results, their net income for the full year 2024 was $5.9 billion." $165M is <3% of that. I nave no idea about this particular case, but often the fines are simply considered the cost of doing business and have little/no effect.
In cases where all auto mfrs must comply with (say) a new emissions or mpg regulation, then we all pay.
However, if only one or two companies are singled out, then they have to eat it. If they attempt to pass the expense on to buyers, they will lose market share.
In this case, 'b' is true (only Ford). WRT 'a' -- "According to Ford Motor Company's 2024 financial results, their net income for the full year 2024 was $5.9 billion." $165M is <3% of that. I nave no idea about this particular case, but often the fines are simply considered the cost of doing business and have little/no effect.
In cases where all auto mfrs must comply with (say) a new emissions or mpg regulation, then we all pay.
However, if only one or two companies are singled out, then they have to eat it. If they attempt to pass the expense on to buyers, they will lose market share.
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<Seth Meyers> "Back in my day, we worked 18 hours a day. If we were lucky we got 4 hours of sleep -- and we LIKED it!"
Older generations have been criticizing younger ones since the beginning of time.
That said, now that I'm approaching SS age...all of the kids today are lazy slackers!! In all seriousness, I try to be objective but it does seem like younger people are less interested in working than my friends and I were at that age. We baled hay; worked at an egg farm; installed fences and aluminum siding; and worked on an aqueduct construction project where we got paid $1/hour extra if we didn't get injured!
Flipping the script -- we often hear, "Americans won't do those jobs!" That leaves out the most important part: "Unless the pay and benefits are reasonable."
Maybe the pay and benefits at assembly plants are reasonable, IDK. But if they don't pay very well, that could explain the high percentage of stoners.
For a $165M fine, we're talking about $10.64 per unit sold. You can bet that'll be baked in under whatever cost increase they want to claim. Won't affect market share one whit.
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Maybe.
From my non-MBA perspective though, it seems like -- all else equal -- if one company has an expense that their competitors do not, they can only pass so much of that on before customers go elsewhere.
The auto industry is famous for its bean counters -- being concerned with any increase in cost per vehicle, even 25 cents.
In this case, if it's <$11 per unit, maybe that won't have much effect. Of course, if that's the case, why not raise prices across the board, even if there were no fine? Presumably, Ford is charging what they think the market will bear. If they thought they could get away with another $10/unit they would have done so.
My former employer, Metro (the D.C. subway) found that any increase in fares -- even 10 cents -- would result in decreased ridership. It seems ridiculous, but apparently at any price point there are people who are on the fence.
Granted, cars aren't subway fares, but the idea is the same -- there are potential buyers for whom any further increase in price will cause them to walk -- especially if the increase drives the price over a 'psychological barrier' -- like $40,000 (vs $39,995).
To be fair, there aren't other Metros to compete with, either. Sure, there's the bus, etc., but if you're committed to the train, there's only one option.
Within a given make/model of auto, where there's a substantial disparity in MSRP across a model's multiple trim lines, the price sensitivity isn't as strong a factor as one might think. I may want a Badlands, but can only afford an Outer Banks, for example. I still get a Bronco Sport either way, Ford still gets a sale.
And even with stupid financing terms, people still insist on buying cars they can't afford anyway, so where's the motivation for the mfr to not add the extra ten bucks?
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Is it a fine a tax deductible?! Just asking, I don't have no knowledge of
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Good point about subway systems having no direct competition (whereas car mfrs have plenty). Of course, no competition would tend encourage people to continue riding the subway -- especially when the fare increase is minimal -- yet a significant number jump ship.
My understanding is that those who leave are mostly people who own cars and were riding Metro to: save money and/or save time; and/or avoid traffic. There may be other factors at play -- train delays; overcrowding; other recent fare or parking rate increases, etc.
So those who can drive are in a situation where there is 'competition' (their own vehicle) -- but yeah, others are SOL.
Regarding Ford passing on the cost of the fine, they may. As a general rule though (setting aside the amount per unit) if one mfr out of several in an industry incurs an expense that its competitors do not have, they must absorb that cost. Most markets are very price sensitive so they have no choice if they want to hold on to their market share.
Sometimes it's useful to take things to extremes. Maybe an additional $10 will have a negligible effect on sales. But how about $100/$500/$1,000? At some point sales will nosedive. How much are all of these recalls costing Ford? The article said Ford has issued 69 recalls in the U.S. -- the next closest is VW with 15.
Whatever those costs are, they are a prime example of expenses that cannot be passed on without a negative effect on sales -- since Ford's competitors do not have equivalent costs.
That said, your point is well taken. The cost of fees and compliance with regulations -- anything that affects an entire industry will almost certainly be passed on to consumers.
WRT your last sentence:
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