Ford (F) Recalls Basically a Whole Year’s Worth of Vehicles

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Transcript:

[00:00:04] Doug McIntyre: So, Lee Ford cannot stop hitting itself over the head with a baseball bat as hard as it possibly can.

[00:00:13] Lee Jackson: They’re good at it.

[00:00:15] Doug McIntyre: Ford had two recalls in the last week and a half the total, almost 1.5 million cars. Now Ford sells 2 million cars in a year. Alright? So you have a 1.5 million recalls at a company that sells 2 million cars.

[00:00:36] Doug McIntyre: It’s, and listen, the good news was, is that there, there may sales were up 16%. But the problem with this is that they continue to take these huge charge offs on warranty costs. And what it means is that if they were running their company. With even reasonable quality levels, their earnings would be much higher.

[00:00:57] Doug McIntyre: Oh, Lee they take just sort of good standard earnings and then ruin them with warranty costs.

[00:01:05] Lee Jackson: Well, and recalls not only hurt the corporate giant, they hurt the dealerships because even though they get paid to fix them, and are reimbursed for that. It takes, time out of their service departments.

[00:01:21] Lee Jackson: I recently had one, on my CRB, my Honda, and the service guy said that, it. And I live in a small town, but he said in bigger metropolitan areas, it can stack your whole, workup from weeks on end. So yeah, it’s not good. And especially when Ford could actually say, Hey, we were up 16% in sales for May, but our EV sales were down 25%.

[00:01:49] Doug McIntyre: Yeah. Well, I want to go over, I wanna do an, entire breakdown of May if we’re sales, but. It. The people at Ford have now been promising for about three years that quality was job one, that they had the problem solved. They’d hired the right people. Now, one of their arguments had been for a while. Well, those are recalls of old cars.

[00:02:16] Doug McIntyre: Back before we got really good at this. The problem is that some of the models that were recalled in the current process are late model cars. Right. Which means that the whole, this whole theory of, well those were cars that we made 10 years ago when we weren’t sure. That’s not the case.

[00:02:33] Lee Jackson: They rarely recall a car that’s that old anyway.

[00:02:36] Doug McIntyre: Yeah. So when I look at the Ford stock, I say to myself, if they had an average level of recalls and an average warranty charge off to me, instead of this being a $10 stock, maybe it’s a $14 stock just on the adjustment of EPS from not having the warranty cost.

[00:02:54] Lee Jackson: Oh, absolutely, And again, they continue to defend the dividend and as long as they do that, Wall Street will kind of look the other way. But yeah, it’s gotten ridiculous. And it’s funny because. I’ve noticed recently, there’s a lot of, newer Ford models that are coming out to kind of be an adjunct piece to their F-150 business, and strangely enough, one of the things I’m seeing more and more is four or five different versions of the revised Bronco.

[00:03:26] Lee Jackson: And maybe it’s bigger down here in the south than up north or back east, but I’m seeing, I literally, today I saw four different versions. There’s a smaller one and then a bigger one. And Bronco was their, a cash cow kind of SUV for years. And then it just kind of went away. But they have that, they have a model, a small truck, they have a ranger again, but they also have a maverick small truck, which is a, four-door truck that my neighbor has that I’m just now starting to see everywhere.

[00:03:58] Lee Jackson: So you’re so right. If they could just fly the plane not into a wall, I mean, it would, it could be a 14 or $15 stock. I agree.

[00:04:07] Doug McIntyre: And right now it has a seven plus percent dividend, which is better even than your, dividend king, Altria, which has raised its dividend 55 times in 50 years.

[00:04:19] Lee Jackson: Greatest stock ever.

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