Will Thai Court’s Ruling Raise Questions about Ford’s Quality?



Ford Motor Company

Ford stock has fallen in five of the first eight months of 2018. The stock has faced investor pessimism in the last three months. On a month-to-date basis, the company has risen by 1.2% as of September 24. Meanwhile, General Motors (GM) has lost 3.6% month-to-date, while Fiat Chrysler (FCAU) and Ferrari (RACE) have gone up by 7.0% and 6.0%, respectively.

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Thai civil court’s ruling against Ford

According to the Bangkok Post, the South Bangkok Civil Court in Thailand “ordered Ford Sales & Service (Thailand) to pay 291 car owners for substandard vehicles in the country’s first class-action ruling” last week. In its order, the civil court asked “Ford Motor to pay 291 customers compensation in a range between 20,000 and 200,000 baht each” ($616 to $6,163). In addition, the company also must pay “a 7.5% interest rate a year, for repair costs and lost time.”

The joint lawsuit was filed by owners of Ford “Fiesta and Focus models produced in 2011” due to a problem involving the car’s PowerShift transmission. While this ruling might not directly affect Ford’s long-term business plans, it might raise questions about the quality of its vehicles in the consumers’ mind.

Q3 2018 estimates

Wall Street analysts estimate (XLY) Ford’s third-quarter adjusted earnings to drop by 26% YoY to $0.32 per share. At the same time, analysts expect Ford’s adjusted net profit margin to be at 3.7% in the third quarter, reflecting sequential improvement from 3.1% in the second quarter. However, the reported net profit margin is much worse than the 5.2% reported in the third quarter of 2017.

These lower third-quarter earnings estimates could continue to hurt investors’ sentiments in the coming weeks and keep Ford’s stock mixed to negative.


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