Shares of Ford Motor Co. (F) dropped 0.8% on Sep 5 on the news of a recall in China, along with monthly sales figures from the nation, which were weak compared with the first 7 months of 2014. The stock has continued to tumble thereafter, with cumulative loss of 3.7% in the last three trading sessions.
On Sep 5, 2014, the news broke out that Ford's Chinese joint venture Changan Ford Automobile Co Ltd. will recall 191,770 vehicles in China as the General Administration of Quality Supervision, Inspection and Quarantine found the risk of fuel leak, which could even lead to fire. The quality watchdog was investigating consumer reports related to the same.
Consequently, Ford is recalling the New Focus and Classic Focus sedans manufactured since 2009. The company will replace some parts free of cost to remove the fuel leak risk. It is worth noting that Ford Focus is the company’s highest selling car in the compact sedan segment in China.
Changan Ford had initiated a customer satisfaction program in 2012 to address the aforementioned problem. However, it has now resorted to a safety recall to ensure that all affected vehicles are covered.
This is the largest recall by Ford in China in the last four years. However, the automaker might have to expand or renew the recall if the General Administration of Quality Supervision, Inspection and Quarantine finds it necessary.
Ford is already witnessing slower growth in China sales. The automaker sold 77,506 vehicles in China in Aug 2014, which reflects a 9% year-over-year increase from 71,183 units sold in Aug 2013. In comparison, Ford had reported double digit growth in all the previous months in 2014. Moreover, last year, its sales in the nation had increased 49%.
Currently, Ford carries a Zacks Rank #3 (Hold). Meanwhile, one could consider better-ranked automobile stocks such as Tesla Motors, Inc. (TSLA), Fox Factory Holding Corp. (FOXF) and Gentherm Inc. (THRM). Tesla sports a Zacks Rank #1 (Strong Buy), while Fox Factory and Gentherm have a Zacks Rank #2 (Buy).
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