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Ford just cannot get out of its own way when it comes to quality issues and warranty repairs. The automaker missed its second-quarter earnings targets by a long way, and it said a surge in warranty repair costs for older vehicles was to blame.
Quality issues have been a big problem for Ford for years now, but an $800 million spike in the second quarter is an almost otherworldly amount of money to spend on fixing cars you didn’t get right the first time. CFO John Lawler said the expenditure was a “one time” jump due to issues with cars built in 2021 or earlier. From Bloomberg:
“We can’t read this quarter as the year is coming off track — it’s not,” Lawler said.
Ford reported adjusted earnings per share of 47 cents, well short of the 67-cent average estimate of analysts surveyed by Bloomberg. Second-quarter revenue rose 6.2% to $47.8 billion.
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“The warranty challenges are frustrating for investors, as they come on the heels of many other warranty issues in past years and at times drag results without warning,” Barclays analysts led by Dan Levy wrote in a research note.
Last year, Ford spent $4.8 billion fixing customers’ cars. Early this year, the automaker held some 60,000 redesigned F-150 pickup trucks in lots around Detroit for extra quality checks. Chief Executive Officer Jim Farley said that helped the company avoid 12 recalls and said that would be the process going forward for all new models.
Farley said Ford is now “testing vehicles to failure” and running them “at extremely high mileage” to discover quality problems before they reach customers. It will take as long as 18 months to see the benefits of that new process show up in lower warranty costs.
“It makes our quarters lumpy and it’s challenging, but it will reduce warranty over time,” Farley said.
Ford reiterated its earnings outlook for the year, forecasting profit of $10 billion to $12 billion before interest and taxes. But that includes lower guidance for Ford Blue, the unit that makes gas-powered vehicles and hybrids, due to the quality woes. The automaker now expects Ford Blue to earn $6 billion to $6.5 billion before interest and taxes, down from a previous forecast of $7 billion to $7.5 billion.
Read more: Tesla, Ford, and Stellantis stocks are all sinking thanks to weak profits
A version of this article originally appeared on Jalopnik’s The Morning Shift.