Why This Horrible Ford Record Is Important for Investors

The automotive industry is widely known for its competitive fire, capital-intensive business, and often lower margins; many of the industry's closest rivalries have existed for numerous decades. Rivals such as Ford Motor Company (NYSE: F) and General Motors (NYSE: GM) are intense, and in some segments, price points, and strategies, the two have been neck and neck from day one. That said, there's one major record Ford won in 2025 that it might prefer to avoid, but there's a silver lining for investors.

Recall woes

Recalls are a common part of business in the automotive industry, and automakers typically set aside funds to cover warranty costs. However, this was no ordinary year for Ford recalls, as the company had 153 recalls that affected nearly 13 million vehicles in 2025. Not only is that a record for recalls in any single year in history, but it's also nearly double the previous volume of recalls set in 2014, with General Motors recalling 77.

"We are not satisfied with the current level of recalls or the number of vehicles impacted," Ford COO Kumar Galhotra told investors, according to Automotive News. "We are working to reduce the cost of these recalls."

Image source: Getty Images.

While automakers do plan for and allocate funds for warranty costs, it's also true that any given quarter, recalls can spike to a degree that costs the company significantly. As recently as the summer of 2024, Ford stock tumbled as its profits missed estimates due to a $800 million spike in warranty costs during the second quarter, which pushed its total warranty costs to roughly $2 billion. For some context, during that second quarter, Ford Blue, which is the automaker's traditional car business, generated an operating profit of $1.2 billion. These recalls can carry sizable bottom-line consequences.

Darkest before dawn

Ford has had warranty costs jump up and bite it in the bottom line in recent years, directly hurting its profitability. However, Ford's CEO Jim Farley has made it a priority to improve quality during his tenure, and if management is to be believed, quality has improved, and warranty costs are going down, particularly in newer vehicles – warranty costs have previously been blamed largely on older vehicles in the global fleet.

For investors, Ford's emphasis on improving quality might lead to more recalls in the near-term, but it'll help protect the brand while improvements on newer vehicles filter into the global fleet, protecting the bottom-line from more profit-eroding warranty costs down the road.

Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.