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Since its beginning in 1903, Ford has been an innovator in car manufacturing. Ford began with just 12 investors and $28,000 and was nearly out of cash by the time it sold the first Model T in July of 1903. But by October of that year, it had already turned a profit of $37,000. As Ford grew, it invested in its employees, by being one of the first companies to implement an 8-hour workday and pay $5 per day (previous pay was $2.34); because of this, people were lined up to be part of Ford. The company experienced growth and ingenuity through the 1970s, which was considered the company’s Golden Age. The company produced an all-time high of 2.35 million cars in 1973 (Ford, n.d.).
Before we begin to talk about Ford’s problems, let’s look at the different types of automobile recalls. The first type of recall is overseen by the National Highway Traffic Safety Administration, which is a federal agency. This type of recall is mandatory after NHTSA investigations and is usually for more serious safety issues, and the recall notices are sent to the last known owner’s addresses. The customer then takes their car to the dealership for repair, but at no cost to the customer. The dealerships bill the manufacturer for the work performed. This type of recall can be used to fix the issue, which can cost car manufacturers millions, even billions, of dollars (“Investigation and Recalls”, n.d.).
The second type of recall is voluntary and is initiated by car manufacturers themselves, but sometimes they work with the NHTSA to initiate the recall. These are issues with the vehicle that may not be a major safety issue, but it helps automakers with any potential liability issues (“Safety Defects and Recalls”, 2017).
Ford’s quality problems were particularly high profile in the 1970s with the Ford Pinto. The fuel tank had been designed to be placed by the right rear axle, Due to this design, when the car was rear-ended, even at modest speeds, the fuel tank was driven into the axle, causing it to puncture. As a result, sparks from the crash would cause the car to start on fire. Twenty-seven deaths allegedly were caused by the design of this vehicle. In an internal memo that was leaked to the public, Ford ran a cost-benefit analysis to find it is cheaper to “let them burn” and pay off the victims than fix the quality problem or recall all of the Pintos on the road (Reiff Law Firm, n.d.). However, the punitive damages following this leak were much more than Ford anticipated.
Despite the issue with the Pinto, problems at Ford continued. In 1980, Ford had issues with over 23 million vehicles for a faulty safety latch, which would put the vehicle in reverse unexpectedly, causing numerous accidents and deaths. Rather than recall the vehicles, they sent owners a sticker to put on the car to remind them to put the safety brake on (Martin, 2014).
In the 1990s, Ford saw vehicle recalls and warranty actions yet again. These involved cars and trucks from 1986 to 1990 model years. Some of the recalls were due to cracking of the floor pan under the seats of some Bronco and F-series super cab trucks. Some of the other recalls involved Mustangs, Capris and Thunderbirds not meeting carbon monoxide emission level standards (L.A. Times, 1990).
The 2000s brought several recalls—for example, one recall of over 792,000 SUVs and trucks, where the cruise control didn’t shut down properly, causing fires, even when the vehicle was turned off. This occurred because power flows to the switch even when turned off, causing overheating and possible flames. In 2017, NHTSA opened an investigation into transmission issues which led to a recall of 668,000 trucks (NBC News, 2005).
Most recently, Ford had 68 recalls in 2022 that impacted over 8.5 million vehicles, 54 recalls in 2023 that affected 5.5 million vehicles, and in the first part of 2024, had 28 recalls that impacted 3 million vehicles. Part of this contributes to the Consumer Reports rating of Ford at a dismal ranking of 22 on reliability, with such brands as Chevy, Dodge, and Hyundai above them (Bergmann, 2023). While many of these issues were on older vehicles, the 2024 Ford Mustang, a recent model, was recalled for having a faulty clutch pressure line that could melt, leak brake fluid, and cause a fire. These statistics make Ford the most recalled major car brand year over year (McGraw, 2024).
Of course, recalls are not good for the reputation of the brand, nor the bottom line. These extensive recalls have cost Ford an estimated $4.8 billion dollars annually (McGraw, 2024). But what steps have they taken to reduce these costs to both the bottom line and reputation?
Farley was quoted as saying, “The capability atrophied in engineering, supply chain and manufacturing at Ford, and needed a much more fundamental reset than I’d realized.” Atrophy means a gradual decline in effectiveness due to neglect, so this is a strong statement from the CEO. One of the elements of quality, if you recall, involves commitment from leadership. Leadership must establish strategies and institute programs for quality, which Farley has done.
Another reset was a culture shift driven by Farley. Recall leadership is important in motivating managers and workers to adhere to, and even suggest, quality standards. Previously, despite the quality issues, 91% of managers earned full bonuses. Now, Farley says, every engineering manager, purchasing component manager, and plant manager is fully accountable for the quality and cost of their work (Muller, 2024).
Recall another element of dimensions of quality includes process management. In addition to a culture shift, Farley says the company has implemented end-to-end changes, from supply chain to engineering to manufacturing, which all include finding the root causes of issues. One way they are achieving this is through a build and hold strategy. Implemented by Farley, this strategy holds new or refreshed models for an additional six weeks after being built and puts the models through a more extensive series of quality control checks. For example, the 2025 Ford Explorer, 2025 Ford Bronco Sport, and 2025 Ford Maverick are impacted by the build and hold strategy. A vehicle is driven 25 miles, and performance is scrutinized. Higher mileage, real-world testing occurs. However, there are several challenges with this as a solution to quality.
First, this increases inventory costs for Ford, such as storage costs, insurance, and tax costs. It can also cause cash flow issues, since money spent on producing cars will take longer to be recuperated. Obsolescence and market changes can have an impact on the demand for these vehicles as well. Despite the costs and risks, this strategy appears to be working for Ford.
In addition to build and hold, they have many more quality checks on the product line. They’ve also added AI (artificial intelligence) on the production line to catch quality issues that are not visible to the human eye. This speaks to the principle that quality control requires commitment of resources, which Farley has done. With these changes, Ford has seen a 10% improvement in quality in its 2024 models, and its defect rate for latest launches has fallen to 20%, which is industry standard (Howard, 2023).
In summary, Ford has made extensive changes, from culture shift to quality to implementation of additional controls such as inspections. But how does this compare to Toyota, for example, who implements the Toyota Production System, replicated by thousands of companies as Lean manufacturing? As you may recall, this is a manufacturing philosophy that aims to eliminate waste and achieve the best possible efficiency. While Toyota has had its own recall issues, such as one in 2012 where 7.4 million recalls occurred due to faulty power window switches which could catch on fire (among other issues), Toyota is still rated among the top three most reliable brands (Banks, 2023). Toyota employs innovative and comprehensive quality measures that include inspection of every vehicle that comes off the production line. Toyota also has a culture of pride in the quality for all employees, which is a key principle of TQM. As Ford works to improve quality, the lessons learned include ensuring top leadership and workers take responsibility for quality, and everyone in the organization at all levels should be involved in quality management.
Source: This tutorial was authored by Sophia Learning. Please see our terms of use at TERMS OF USE.
REFERENCES
Banks, M. (2023, September 26). The Biggest Car Recalls in History, Updated for 2024. Modded. modded.com/cars/the-biggest-car-recalls-of-all-time/
Bergmann, A. (2023, November 29). Who Makes the Most Reliable New Cars? Consumer Reports. www.consumerreports.org/cars/car-reliability-owner-satisfaction/who-makes-the-most-reliable-cars-a7824554938/
Craven, Hoover, & Blazek, P.C. (2016, May 2). The Three Largest Ford Automobile Recalls in History. CHB Law Firm. www.chblawfirm.com/blog/the-three-largest-ford-automobile-recalls-in-history/
Ford Auto Co. (n.d.) Company Timeline. Ford. corporate.ford.com/about/history/company-timeline.html
Howard, P.W. (2023, May 11). Shareholders ask Ford execs to explain plan for fixing quality. Detroit Free Press. www.freep.com/story/money/cars/ford/2023/05/11/ford-shareholders-meeting-questions-farley/70206889007/
L.A. Times (1990, October 1). RECALLS : Ford Begins Huge Vehicle Recall. Los Angeles Times. www.latimes.com/archives/la-xpm-1990-10-01-fi-1384-story.html
Martin, M. (2014, December 24). The little warning label that saved Ford from a 23-million-vehicle recall. Auto Week. www.autoweek.com/car-life/but-wait-theres-more/a1913301/little-warning-label-saved-ford-23-million-vehicle-recall/
McGraw, Jess (2024, June 21). Ford Delays Vehicles to Correct Poor Quality Control. Auto News. www.carsforsale.com/auto-news/ford-delays-vehicles-to-correct-poor-quality-control
Muller, J. (2024, February 15). Ford CEO admits "big" regret over quality issues. Axios. www.axios.com/2024/02/15/ford-jim-farley-quality-issues
National Highway Safety Association (2017, August). Motor Vehicle Safety Defects And Recalls. National Highway Safety Association. www.nhtsa.gov/sites/nhtsa.gov/files/documents/mvdefectsandrecalls_808795.pdf
National Highway Traffic Safety Association (n.d.) Resources Related to Investigations and Recalls. National Highway Safety Association. www.nhtsa.gov/resources-investigations-recalls
NBC News. (2005, January 27). Ford recalls 792,000 popular pickups, SUVs. NBC News. www.nbcnews.com/id/wbna6876176
Reiff Law Firm (n.d.) Ford’s Fiery Pintos Lead to Injuries, Deaths, and Lawsuits. Reiff Law Firm. www.reifflawfirm.com/fords-fiery-pintos-lead-injuries-deaths-lawsuits/
