Summary
Ford Motor Company (F) announced on September 8, 2016, an expanded field service action that is estimated to cost approximately $640 million. This cost, which includes prior service actions, will be recorded in the company's third quarter 2016 adjusted pre-tax results, with the majority impacting the North America business unit. This announcement has led to an adjustment in Ford's full-year 2016 total company adjusted pre-tax profit guidance to approximately $10.2 billion. The company reiterates its expectation that third-quarter 2016 adjusted pre-tax profit will represent about 10% of the revised full-year forecast. Investors should note that this significant expense, primarily related to vehicle quality or potential defects, impacts the company's profitability outlook for the year. While the company is proactively addressing these issues through field service actions, it highlights potential ongoing risks related to product quality and warranty costs. The updated profit guidance suggests a slight tempering of the previously anticipated performance, though the company maintains its third-quarter profitability margin expectation.
Key Highlights
- 1Ford announced an expanded field service action on September 8, 2016.
- 2The total estimated cost for this expanded action, including prior actions, is approximately $640 million.
- 3These costs will be recognized in the third quarter of 2016 within adjusted pre-tax results.
- 4The North America business unit is expected to bear the primary costs of this service action.
- 5Ford now expects its full-year 2016 total company adjusted pre-tax profit to be around $10.2 billion.
- 6The company continues to anticipate Q3 2016 adjusted pre-tax profit to be approximately 10% of the revised full-year results.
- 7This filing includes risk factors related to product defects, recalls, and increased warranty costs.