OCTOBER 23RD 2015
CHINA SINGULARITY FOR FORD JV FUEL SAFETY LAPSE
China’s national quality watchdog last Friday announced the recall of almost 220,000 Kuga sports-utility vehicles citing potential fuel leakages.
Vehicles manufactured over a period spanning from July 3rd 2012 to November 26th 2014 have been listed as a safety risk, according to the General Administration of Quality Supervision, Inspection and Quarantine. The issue with the vehicle boils down to an oil tube defect, which the body has warned may potentially crack and cause extended fuel leaks.
Ford shares are expected to remain under fire with the recall arriving shortly after the VW scandal earlier this month. Volkswagen’s AG (ADR) diesel emission scandal has remained in the headlines since the scandal, causing a PR headache. Ford will be hoping to deal with the issue as quickly and quietly as possible to avoid media linkages and consumer panic.
The Kuga sports-utility vehicle is manufactured in China under the name Changan Ford Automobile Co Ltd., a joint venture between Chongqing Changan Automobile and American-based Ford. The recalled vehicles will all have defaults checked and replaced free of charge.
Ford is not the only foreign entity to have made a JV on China’s mainland. Other US automakers such as General Motors also produce cheap vehicles across China for the large domestic market using the same approach. Regulations by the Chinese government make JVs the best solution for gaining access to Chinese consumer bases. Ford’s joint venture is split 50-50 with Changan.
A spokesman has pin pointed bumpy roads as the catalyst for the problem’s identification but this is most likely a pass the buck approach to limit damage and stock offloading. Concerns are genuine as recalls can have the effect of depressing unit sales as consumers contend with quality fears. Another concern is that the same default may be lurking in other models.
The Ford case is a pertinent example of the absolute necessity of trustworthy quality control providers when manufacturing in China. Hindsight can be a painful thing.
SOURCES:
http://www.reuters.com/article/2015/10/16/ford-motor-china-recall-idUSB9N12F00620151016
http://www.moneycontrol.com/news/world-news/ford-to-recall-over-219-lakh-vehicleschina_3635061.html
http://www.businessfinancenews.com/25101-ford-motor-company-recalls-220000-vehicles-stock-likely-to-dip/
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