December 3, 2012 / 8:25 PM / in 5 years

TEXT - S&P says Ford's voluntary safety recall has no rtg effect

Dec 3 - Standard & Poor’s Ratings Services said today that Ford Motor Co.’s (BB+/Positive/--) announcement regarding a voluntary safety recall of 2013 SE and SEL model Ford Escape and Fusion vehicles equipped with the 1.6-liter engine has no immediate effect on the rating or outlook on Ford. The potential for engine fires in those specific engines does not affect 2013 Escape or 2013 Fusion models with other engines. Our preliminary view is that this event is more likely to be a challenge to Ford’s improved standing with consumers than a major financial cash cost. Still, given that the Escape and Fusion (all engine types) collectively represented about 24% of Ford brand sales for the first 11 months of 2012, and that no solution is yet available, we would reassess our view if the impact on sales or costs is greater than we currently assume. Recalls (safety, warranty performance, or function are some common catalysts for recalls) in the auto sector are not unusual--and some other automakers have had very large recalls recently, including some which were safety related. Ford estimates that there are approximately 73,320 Escapes and 15,833 Fusions produced and distributed for sale in the U.S. and Canada with 1.6-liter engines, with most in the U.S. market. The recall is specific to those engine types. Ford sold 462,857 Escapes and Fusions of all engine types for the 11 months ended November 2012. The recalled vehicles represent approximately 19% of all Escapes and Fusions sold to end customers so far in 2012, but a higher portion of the Escapes (about 30%) produced or sold than Fusions (7%).

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