(F) Ford Recalls Edge SUVs

Ford Motor Co. (F) plans to recall 5,500 units of midsized sports utility vehicles (SUVs), Edge, in order to fix their defective fuel lines that could potentially cause fire. The recall will cover the vehicles that are equipped with 2-liter engines and manufactured between September 2, 2010, and October 31, 2011.

Ford revealed that fuel lines in the 2012 model year vehicles could crack due to faulty manufacturing by a parts supplier. The crack could result in fuel leak, ultimately leading to fire.

As of now, Ford has received 12 reports of fuel leakage from the owners of Edge. However, none of them led to injuries or fires.

Ford will begin notifying the owners of the vehicles to take them to the nearest Ford or Lincoln dealer. If the problem is detected, the dealers will repair the vehicles free of cost. The recall would begin on September 24.

This is the fifth recall of Ford in about 2 months, 3 of them related to problems causing fire (including the latest recall of Edge). In July, the company had recalled 11,500 Escape SUVs for fixing fuel lines leak that can cause fires. In the same month, the company had said that it would recall 8,266 units of the SUV in order to fix their improperly installed carpet padding that could cause braking failures.

Apart from the redesigned version, Ford had also recalled the prior model of Escape in late July. The automaker had recalled 485,000 units of old Escapes in the month due to sticking gas pedals that can cause crashes.

At the beginning of this month, Ford also announced recall of 7,600 units of its recently launched Escape compact SUVs in order to fix coolant leaks that can cause engines to overheat and may lead to fire. The redesigned Escape SUVs are the company’s second-best selling vehicle after F-Series trucks.

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 on, 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.

Ford, a Zacks #3 Rank (Hold) stock, posted a 39% fall in profits of $1.20 billion or 30 cents per share in the second quarter of the year from $1.98 billion or 49 cents in the corresponding quarter of 2011 due to lower operating results in all the regions except North America. However, the company’s profits were higher than the Zacks Consensus Estimate of 28 cents per share.

Revenues in the quarter dipped 6% to $33.3 billion, due to the same factors mentioned above. However, it exceeded the Zacks Consensus Estimate of $32.0 billion. In the first half of the year, Ford’s U.S. total market share was 15.4% in the U.S. and 8.1% in Europe.

For 2012, Ford anticipates market share in the U.S. and Europe to be lower than 16.5% and 8.3%, respectively in 2011. It also expects the overall pre-tax operating profit to be lower than 2011 compared with the prior guidance of tallying. Operating margin in the Automotive segment is anticipated to be equal or lower rather then the prior guidance of improve over 5.4% in 2011.
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