Ford cannot afford to miss out on quality in the EV revolution

On Monday, Ford fired its biggest round yet in the electric vehicle arms race by announcing it would transform 1,900 acres of farmland in rural Marshall, Michigan, into a $3.5 billion electric vehicle and battery factory. Spurred by the economic incentives of the Inflation Reduction Act, the new BlueOval Battery Park Michigan will not only turn out American-made batteries and EVs, but it will also develop new lithium iron phosphate (LFP) batteries that are expected to be more durable and charge faster. than conventional ones.

Just 90 miles away in Romulus, however, something else was happening: the facility that produces the electric F-150 Lightning had been idle for about a week as engineers tried to fix an undisclosed battery problem. Ford officials later admitted the problem was a battery fire during a pre-delivery quality inspection that spread to another vehicle.

Ford issued more recalls in America than any other automaker

Both developments made headlines this week. That they came within 24 hours of each other says a lot about Ford’s current state.

On the one hand, Ford ended 2022 as the number two seller of electric vehicles behind Tesla. The F-150 Lightning has already established Ford as the leader in electric pickups, and demand for the Mustang Mach-E is not slowing down either.

On the other hand, the automaker that once famously claimed “Quality is Job One” continues to struggle with issues on that front, especially with new products. In 2022, Ford issued more recalls in America than any other automaker: 68 of them, affecting more than 8.7 million vehicles. That was up from 53 recalls affecting 5.4 million cars the year before, according to federal data. In 2021, Ford set aside about $4 billion just for warranty costs, The Wall Street Journal writes last year.

Owners have become frustrated with problems and repairs, especially on new, high-profile vehicles like the F-150 Lightning. That was told by Texas-based Lightning owner Justin Esquibel The Verge his truck is a “$90,000 brick no one knows how to fix,” suffering from problems almost immediately after he bought it in early December. He said he is a member of a Lightning owner Facebook group where many people have complained about problems.

“It’s been in the shop three times and now it’s sitting waiting for a wiring harness that’s on backorder,” said Justin Esquibel. “No ETA and they don’t even know if it’s going to fix it.”

“A $90,000 Brick That Nobody Knows How To Fix”

The situation became even more acute Wednesday when it emerged that Ford was also pausing inside a factory in Louisville, Kentucky to address a software issue affecting the updated Escape crossover, according to Car news. A plant manager told employees at the plant that if the car was to be sent as such, it would have to be recalled and fixed later.

After the battery fire, Ford officials said Lightning production would pause while an investigation and repairs take place, which could take several weeks.

Ford spokeswoman Maria Buczkowski said the problems this week with the Lightning and the Escape are separate, unrelated. She added that Escape’s Louisville plant is still in the “pre-production” process, where bugs and issues are often caught on early vehicles not intended for customers.

Even if the Escape problem was the kind of normal problem that could be caught by any automaker, the fact that it made headlines this week speaks to how many eyes are on Ford’s quality issues.

They are certainly no secret. The automaker has had four CEOs since the Great Recession, and essentially all of them have feared losing profits due to warranty and recall costs on calls with investors. And as Ford ended 2022 with a $2.2 billion loss, current CEO Jim Farley blamed some hits on investments in startups Rivian and Argo AI, but he didn’t mince words on what recalls and defects cost the company.

Ford announces plans for new battery plant for electric vehicles

“In terms of quality, we have work to do,” Farley said on an earnings call earlier this month. “Ford has been number one in recalls in the US for the past two years. That is obviously not acceptable.”

Ford’s quality problems have been blamed on a number of factors, including updating its lineup with multiple new vehicles at once for years to quick, last-minute fixes when problems were caught.

No car company – really no company period – wants to be known for quality issues or deal with costly recalls. But Farley called Ford’s current moment a “dual transformation”: improving quality and driving down costs, becoming the kind of electric-focused, connected, technology-driven “mobility company” investors want auto companies to be now. Doing both at once would be an expensive and difficult proposition.

“Ford has been number one in recalls in the US for the past two years. That is obviously not acceptable.”

“The problem right now, as Ford has pointed out, is that the future is expensive, and so are recalls,” said Jessica Caldwell, managing director of insights at auto-buying website Edmunds. – This is something the company wants to avoid, as cost reduction is more important than ever before. But nevertheless, running (its traditional car business) and (its electric vehicle business) at the same time is a costly venture for Ford, so every penny must be spent strategically.”

For Ford’s part, Farley and other company officials say they have been working on the problem for some time and claim they have already initiated several quality improvement processes.

Buczkowski added that a number of quality-related improvements are already in place at Ford and to get ahead of problems before they become costly recalls.

“Yes, there is a lot of pressure on the company to move in this direction,” she said. “But I think there seems to be progress every day.”

Ford cuts 3,800 jobs as EV shift shrinks German, UK workforce

Almost all automakers have had trouble getting their teeth into the types of cars that will define personal transportation in the future—those powered by electricity and defined more by software than mechanical features.

Volkswagen’s new generation of electric cars has struggled with software bugs. The groundbreaking Chevrolet Bolt has had repeated recalls for battery fires. Consumers across all brands continue to have frustrations with complicated controls, user interfaces and automated driving assistance programs. Even Toyota, arguably the undisputed champion of manufacturing quality, released an EV that had to be recalled because the wheels literally fell off. In that way, Ford’s challenges are not unique.

But Ford’s problems started well before it started rolling out electric cars.

“Ford in particular has run into its fair share of blunders with new vehicle launches in recent years,” said Robby DeGraff, an industry analyst at marketing and consulting firm AutoPacific. “Products that are hot and in demand, like the Bronco, or really important members of the lineup like the Explorer, for example, didn’t have the easiest rollouts.”

Almost every new Ford released in recent years has been subject to costly recalls

Almost every new Ford released in recent years has been subject to costly recalls. The Bronco’s V6 engine was plagued with engine failure; The Explorer, all-new for 2020, had many problems at launch; a recall last year for the Expedition and Lincoln Navigator asked owners to park away from buildings due to fire hazards; and even though Ford doesn’t even make the Focus or Fiesta for the North American market anymore, it’s still paying out claims for lawsuits over defective transmissions made a decade ago.

Caldwell said that with massive recall campaigns in recent years, such as the Takata airbag scandal or General Motors’ ignition switch fiasco, consumers are so bombarded with vehicle announcements that they dismiss them as “white noise.” Still, none of Ford’s quality problems are helping it convince consumers that it can make a shift to new technologies like electric cars.

She said that while many drivers have given Tesla leeway for its well-documented quality issues, it won’t last forever, and Ford won’t get the same treatment.

“That feeling goes away quickly,” Caldwell said. “Ford, with an established name and reputation for inventing the automotive assembly line, will get less leeway from its customers. This is why there is a lot of pressure on Ford to get it right the first time and deliver a good customer experience, which will differentiate it from the new brands that will inevitably struggle to produce high-volume EVs.”

F150 Lightning charger

In theory, the shift to electric cars and software-defined vehicles could eventually mean positive news on the cost front for companies like Ford and its competitors. These cars require far fewer parts to build and can have issues fixed with over-the-air updates. Farley indicated as much on the investor call this month.

“These electric cars will be fully software upgradeable,” he said. “That means an entirely new electrical architecture, and they’re going to be radically simplified. Imagine three body styles, each with a volume potential of up to 1 million units and only a handful of combinations that can be ordered. That’s what we’re doing at Ford for second generation products.”

But getting to that point – and getting costs down to where these new technologies can be profitably scaled – will be a major challenge in the short term for every carmaker.

In theory, the shift to electric cars and software-defined vehicles could eventually mean positive news on the cost front for companies like Ford and its competitors

Ford officials say they have gone to great lengths to address the quality problem. Farley, who took the CEO job in 2020, last year appointed former JD Power CEO and engineer Josh Halliburton to be the quality czar. Halliburton told WSJ last year that Ford has begun monitoring assembly lines via cameras to catch problems, is looking more actively at social media to catch consumer complaints, and has taken steps to empower workers to speak up more proactively if they spot problems.

Buczkowski said a number of other changes are in place that didn’t exist years ago. These include communicating better with parts supplier companies, using connected data from new cars to spot trends, and increasing mobile service and loans for everything from oil changes to recalls.

DeGraff said he believes there is a difference in how Ford operates now compared to previous eras. “I have supreme confidence and trust that Ford is doing literally everything it can to fix the problem immediately,” he said. “Farley and his team have truly demonstrated the kind of leadership needed to respond to a crisis like this and take action.”

Still, with EV competition increasing on all fronts and the billions needed to transform the business, one wonders what the story will be if 2023 ends with Farley once again promising to reduce recall costs.

Buczkowski said there is an urgency for Ford to prevent this outcome from happening.

“I think what’s really getting across to people is that this is a priority in every part of the business right now,” she said. “We are at a critical moment and that has to change. That’s what we talk about in every global town hall, every form of communication.”

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