Farley is the new Teflon Leader who blames everyone else for his failed strategies. Still expects to hit his target for 2024. More blame coming.
As Ford Authority recently reported, Ford stock tumbled dramatically last week following the release of the automaker’s Q2 financial reports, which were disappointing for a number of reasons. FoMoCo’s adjusted profit of 47 cents per share was far below analyst expectations of 68 cents, but perhaps a bigger concern stems from swelling warranty costs – which grew by $800 million compared to Q1 2024, leading to a massive impact on profits. Now, CEO Jim Farley has provided some insight as to what drove that substantial increase in warranty costs.
“The other thing we maybe made it more difficult in a way, but better for the company fitness-wise, is we put a lot of new technology in our vehicles,” Farley said during Ford’s Q2 earnings call with investors. “And that new technology is difficult for the dealers to diagnose when customers come in and say something is wrong with my SYNC system.”
“They replace modules unnecessarily, et cetera, and that hits our warranty reserves. What we’ve found though is that this kind of fixing is different than mechanical fixes, where that OTA capability redirected to these defects can really reduce our cost outlays for the warranty…against the warranty reserves. And we’re working all of those cost curves every day for each of our models.”
Looking ahead, Ford still expects to hit its warranty cost targets for the entirety of 2024, in spite of this massive jump, but it’s not terribly surprising that investors are a bit skeptical, regardless. However, there are some signs that the automaker’s quality is improving, as it ranked above the segment average in the recently-released J.D. Power 2024 U.S. Initial Quality Study, and Farley himself recently stated that the 2024 Ford lineup has better initial quality versus 2023 and prior, too.