(F) Ford Recalls Minivans and SUVs

Ford Motor Co. (F) announced that it would recall 539,000 vehicles including Ford Escape SUVs, and Ford Freestar and Mercury Monterey minivans because of safety issues. Most of the recalled vehicles were sold in the U.S.

The automaker would recall 286,000 units of Ford Escape SUVs from the 2001 and 2002 model years due to a problem with the braking system that could lead to fires. The SUVs have a faulty brake master cylinder reservoir cap that could leak brake fluid. The leakage could cause an electrical short in the antilock brake system.

According to a filing with the National Highway Traffic Safety Administration (NHTSA), Ford had announced a similar recall in 2007 in order to repair the defective antilock brake system in the vehicles. However, some vehicles may not have been properly inspected or repaired causing the latest round of recall.

Ford revealed that the defective antilock braking systems were manufactured between October 1999 and July 2002 at a factory that had been closed. The automaker stated that parts shortages could delay the necessary repair in some cases. So far, it has not received any reports of accidents due to the problem.

The second round of recall involves 253,000 units of Ford Freestar and Mercury Monterey minivans from the 2004 and 2005 model years. Ford discontinued the Mercury brand in 2010 and started focusing on Lincoln.

The automaker detected faulty torque converter in the vehicles that could cause them to lose ability to move forward and reverse without warning. The condition would increase the risk of an accident.

Automotive safety recalls were brought into focus by media after Toyota Motors’ (TM) announcement of the largest-ever global recall of 3.8 million vehicles in September 2009, triggered by a high-speed crash that killed 4 members of a family.

Later, a string of recalls has led Toyota to face numerous personal injury and wrongful death lawsuits in federal courts. The Transportation Department of U.S. also imposed a fine of $48.4 million on the company due to late recall of millions of defective vehicles.

Last month, Ford had recalled 128,616 units of Fusion and Mercury Milan sedans in order to fix the defective steel wheels in the vehicles. The automaker had decided to replace lug nuts on all four wheels and inspect rear-wheel disc brakes surfaces. It may also replace the disc brakes if necessary for some of the sedans with model years 2010 and 2011.

Ford, a Zacks #4 Rank (Sell) stock, posted a $66 million or 3.5% fall in profits to $1.85 billion in the third quarter of the year from $1.91 billion in the same quarter of prior year. However, on per share basis, earnings were 46 cents versus 48 cents a year ago, beating the Zacks Consensus Estimate of 44 cents. The decline in profits was attributable to a fall in commodity prices and anticipated reductions in Financial Services results.

Total revenues in the quarter went up $4.1 billion or 14.1% to $33.1 billion. This compared with the Zacks Consensus Estimate of $29.8 billion.

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