Ford: Virginia Recall Could Hurt Stock

| About: Ford Motor (F)

Ford (NYSE:F) is experiencing some bad luck as it adds 27,000 Windstar minivans from Virginia to a lengthening recall list. There are already over 20 states that currently have recalls in progress.

The reason for the recall of so many Windstar minivans is because the rear axle in all of the models is in danger of cracking and breaking. More than 600,000 Windstar models produced between 1998 and 2003 are being recalled in the U.S. as well as in Canada. Basically, what happens is that in states where salt was used to clear the roads, Windstar minivans can, over time, develop a problem with the rear axle that will cause it to split and break due to the salt exposure.

What makes the problem particularly frightening is that it can happen with very little warning to the driver, causing him or her to suddenly and unexpectedly lose control of the vehicle. Although Virginia was not originally included in this mass recall, reports of 211 cracked axles caused the motor company to change its mind. However, no one was injured in Virginia because of the problem. To me, it seems as if Ford would rather be safe than sorry and stop the problem before it gets any worse in that state. In other states, eight crashes and three injuries occurred as a result of faulty minivans. The company claims that the one death that has been linked to the minivan in Massachusetts cannot be conclusively proven to be related to the axle problem. It appears as if Virginia should be the last state to institute a recall.

Some people believe that Ford took too long to address the issue and therefore put lives at danger unnecessarily. This perception could have a negative impact on the company's reputation and indirectly on the company's stock.

In other news, Ford plans to more than triple its EcoBoost output in Europe by 2015 in response to emission standards growing stricter in the region. Ford's EcoBoost engine combines turbo charging and direct fuel injection to deliver fuel efficiency. By 2015, the company hopes to produce 480,000 EcoBoost cars every year. The company claims that these cars reduce Co2 emissions by 15%. In addition to that, the number of different cars in the Ford franchise that will be available with the EcoBoost engine will increase significantly by 2015. As oil prices rise, and U.S. and European standards for fuel economy and emissions tighten, Ford has shifted its focus toward fuel economy in order to meet its new standards. The company hopes that more than half of its cars will contain the more fuel-efficient engine very soon. Ford also considers itself to be at the cutting edge of innovation in this regard.

Ford recently added the first configurator site, which "allows prospective buyers a chance to look at the trimline and features of the 2013 Fusion set to arrive in dealerships later this year." The only thing that you will not be able to find on the site just yet are the prices of the new car. Other than that, you will be able to explore every possibility.

Ford competitor Honda (NYSE:HMC) recently won a small claims court appeal against a woman saying that her 2006 Honda Civic Hybrid never achieved 50 mpg as advertised. Had Honda lost the suit it would have had to pay the woman about $10,000. The judgment was initially passed, but was then overturned by a judge. However, the woman in question, Heather Peters, was only first of many individual Honda Civic owners who have decided to sue Honda on their own. At the end of the day, Honda could be made to pay huge amounts of money in damages. Either way, the legal disputes damage Honda's reputation in claiming high fuel efficiency for its vehicle line.

BMW (BAMXY.PK) has given ActiveE drivers additional incentive to fuel up with the sun. BMW has already helped its consumers to kick the gasoline habit, but now the motor company is offering extra incentive to its customers to be environmentally friendly. Basically, what BMW has done is found a way to offer ActiveE drivers discounted residential solar panel systems so they can charge up using only the sun. The car company struck a deal with Real Goods Solar to install solar panels at discounted rates in the homes of ActiveE drivers.

Toyota (NYSE:TM) expects to experience a significant surge in profits this year as it recovers rather well from the disasters of 2011. In fact, the company expects its profits to more than double and reach a five-year high as the year progresses. This is good news indeed for Toyota stockholders. To regain lost ground, the company is putting out new Prius hybrids, Corolla compacts and Lexus sedans. That being said, the company now has to face a whole lot more competition than in the past.

General Motors (NYSE:GM), for example, has reinvented itself into a formidable foe. General Motors may not turn out to be the threat that Toyota imagines it will be. As things stand, General Motors is trying to sell a French transmission operation to staunch losses in its troubled European operations. The basic strategy seems to be to "close plants and cut jobs across the region to press individual governments and unions for concessions, including at operations that it intends to keep." This may well be in response to increased pressure from investors who want to see a significant change in General Motors' European market as soon as possible to put their minds at ease.

The Virginia recall is a distraction for Ford right now. The hope is that it will be a short-lived distraction and the auto giant can focus on pushing new cars into the market. If these new cars, equipped with strong fuel efficiency, sell well, expect Ford to grow hand in hand.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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