Legacy automaker Ford (F) has had a rough year so far, especially as far as recalls go. With number 100 for the year well in sight, and roughly a third of the year yet to go, Ford is out to break and secure records for some time to come. That is prompting some to get very concerned about Ford’s big new assembly line and electric vehicle plans. Investors were likewise concerned, and sent Ford shares down fractionally in Thursday afternoon’s trading.
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Indeed, the new production plans always represented a certain amount of risk at Ford. Jim Farley himself came right out and said it: “There are no guarantees.” Ford has already demonstrated that it has serious quality issues. This many recalls in this short a space all but drives the point home like a nail hammered in with an asteroid from low Earth orbit.
Ford is trying to make a whole new kind of assembly line, and it is trying to do so in a time when it has demonstrated problems with the old kind. So when you take Ford’s current lineup of problems and couple them on to a brand-new assembly process with exactly zero precedent anywhere in Ford, or anywhere else for that matter, you have a recipe for unintended consequences that is thicker than a phone book. The odds of this going smoothly out of the gate are minimal. And with warranty costs already catastrophically high, the end result is not likely positive for Ford.
This Is Exactly What I Meant
And, almost on cue, proof emerged that demonstrated how much of a problem this might be. Ford issued a brand new recall and brought itself even closer to Recall Number 100. This time, Ford Mustang, Mustang Mach-E, and Lincoln Nautilus cars are on the list over a matter of headlight diodes.
Reports note that the LED Driver Modules may have a burnt diode. This in turn could cause not only headlights, but daytime running lights, and even front turn signals to fail. This may also hit rear turn signals, tail lights, and position lights on the Nautilus. And, of course, the solution is a march back to the dealership where the vehicle will be examined and the LED Driver Modules will be replaced as needed, again, on Ford’s dime.
Is Ford Stock a Good Buy Right Now?
Turning to Wall Street, analysts have a Hold consensus rating on F stock based on three Buys, eight Holds and three Sells assigned in the past three months, as indicated by the graphic below. After a 9.37% rally in its share price over the past year, the average F price target of $10.70 per share implies 6.22% downside risk.
