Summary
Ford Motor Company has announced a field service action impacting approximately 180,000 model year 2011 through 2017 Explorer vehicles due to a suspension issue. The estimated cost of this recall is $180 million, which will be recognized in the second quarter of 2019 and borne by Ford's North America business unit. Despite this expense, Ford reaffirms its expectation for company adjusted EBIT to be higher than in 2018, indicating confidence in the company's underlying performance. The company also provided an update on the ongoing Transit Connect customs ruling. Following a recent ruling by the U.S. Court of Appeals for the Federal Circuit on June 7, 2019, which favored U.S. Customs and Border Protection (CBP), Ford is evaluating its next steps. This legal matter concerns the duty rate applied to imported Transit Connect vehicles converted to cargo vans. Importantly, Ford states that its adjusted EBIT guidance for the full year remains unaffected by the potential financial implications of this ruling, whether it results in a refund or a payment.
Key Highlights
- 1Ford is undertaking a field service action for a suspension issue in certain 2011-2017 model year Explorer vehicles.
- 2The estimated cost of this service action is $180 million.
- 3The expense will be recorded in the second quarter of 2019.
- 4This cost will be absorbed by Ford's North America business unit.
- 5Ford reiterates its full-year adjusted EBIT guidance is expected to be higher than in 2018.
- 6A recent court ruling favored CBP in the Transit Connect customs duty dispute.
- 7Ford's full-year adjusted EBIT guidance is not impacted by the Transit Connect ruling outcome.