I didn't say it wasn't, however, the cost comparison without the tax credit is inappropriate. The next part is the 40% lower cost of ownership.
For people that can charge at home on cheap residential rates, anyway. (Probably around half of the US.)
Mark, your point is well taken about the $7,500 tax credit but for some (most) of us that credit will not show up for more than 12 months since we will not take delivery until after the 1st of the year and it is not deducted from the purchase price. As such, the additional $7,500 will also be included in the loan so there will be interest paid on it also. For those paying cash it is a large consideration.
and most EV buyers.
TL;DR: "As part of its new effort to cut warranty costs, Ford has told suppliers it will charge them upfront for half the cost of a warranty problem."Ford’s new CEO tackles warranty costs in bid to boost profit
Ford’s new CEO tackles warranty costs in bid to boost profit
FILE PHOTO: Ford Motor Co. CEO Jim Farley poses next to a new 2021 Ford F-150 pickup truck at the Rouge Complex in Dearborn,
By Ben Klayman
DETROIT (Reuters) - Quality is once again Job One at Ford Motor Co.
Taking a page from the automaker's ad slogan of the 1980s and '90s, Ford's new chief executive, Jim Farley, is aiming to rein in rising warranty repair costs that are a key reason why the Dearborn, Michigan, automaker's financial performance in North America has lagged that of its archrival, General Motors Co.
As part of its new effort to cut warranty costs, Ford has told suppliers it will charge them upfront for half the cost of a warranty problem. Suppliers might get some of the money back if they resolve problems more quickly.
"What we are striving for is to fix the issues as fast as possible so that those adjustments are as small as possible," Kumar Galhotra, president of the automaker's Americas and International Markets group, told Reuters. "They're more incentivized to work with us."
Ford North America's chief operating officer, Lisa Drake, who is responsible for quality and vehicle launches, said in the same interview supplier contracts have always allowed such debits.
"We were never doing it and frankly, it was probably one of the reasons that we became a bit more uncompetitive," she said.
The move to charge parts makers upfront has some supplier executives worried.
"They push their suppliers so, so hard that it causes the supply base to be weak in the knees," said one executive, who asked not to be identified.
But for Ford investors, action to shrink the U.S. automaker's outlays for vehicle defects is overdue. Ford's warranty costs for the first nine months of 2020 were more than $2 billion higher than those of GM.
Industry officials blame the automaker's higher costs on the introduction of several major vehicle platforms and powertrains, as well as the fallout from the Takata airbag recall that has now also hit GM.
Bad parts from suppliers account for about one-third of Ford's warranty costs, Drake said. The rest stem from design and manufacturing issues, Galhotra said.
"Warranty recovery is increasingly seen as a revenue source" by the automakers, said Ann Marie Uetz, a Foley & Lardner attorney who works with auto suppliers. "Often times, it can feel like a bit of a grab."
To attack internal quality problems, Ford has reconstituted teams that track the quality of inbound parts at its plants. These teams were previously disbanded as cost-cutting moves. Farley is pushing executives to resolve quality issues that linger beyond 30 days.
WIDENING GAP
Ford's quality gap compared with GM has worsened during the past three years. Warranty claims have ballooned almost $2 billion since 2017, Credit Suisse analyst Daniel Levy said.
In 2012 and 2013, Ford's warranty claims as a share of sales were below 2% every quarter, according to industry publication Warranty Week. But at the end of 2018, warranty costs topped 3% and hit 4.3% in the second quarter of this year as overall sales slid due to the coronavirus shutdown.
For a graphic on Ford's warranty costs, click: https://tmsnrt.rs/2UiI9XP
For the first nine months of 2020, Ford's warranty costs totaled $3.87 billion, while GM's were $1.68 billion, according to regulatory filings.
"It can be fixed," Warranty Week editor Eric Arnum said of Ford. "They just have to make the effort."
Ford investors are focused on the launches of the redesigned and lucrative F-150 pickup truck, and the new and highly anticipated Bronco SUV, but reducing what it spends on repairing vehicles at dealers could provide a big boost to the bottom line.
"We're targeting a fully competitive level of warranty spend on coverages and that's got lots of zeroes next to it," Farley said on an Oct. 28 earnings conference call, citing a need to be "punitive" with suppliers who ship faulty parts.
Galhotra said Ford is applying lessons it learned from the mistakes made in last year's costly introduction of the redesigned Ford Explorer SUV to keep its current launches on track.
Part of the quality push involves reducing the complexity of the automaker's vehicles, Farley said.
For example, the proximity key for the F-150 truck unlocks all four doors, but Farley said consumers only use it for the front doors, meaning Ford can eliminate two sensors - a manufacturing cost savings and a potential reduction in warranty risk.
Ford also plans to use data gathered from vehicles to catch problems faster - in minutes rather than months in some cases - and fix them with over-the-air software updates, Farley has said.
Credit Suisse analyst Levy said investors are hopeful Farley can change things, but he will have to prove it.
"There was a track record already of Ford underperforming and I think this is a frustration for investors," he said.
The $7,500 is also of immediate value to Ford Options customers.
Yep. Most that can't charge at home likely won't choose BEV.
If they can get the suppliers to agree. And find new suppliers that are willing to agree to replace the ones that didn't.
Have to change with ford or another supplier will. Just like when the auto industry went to just in time parts. This is not just ford, but all auto companies are looking to do this.
Clearly if other car makers see this working for Ford, they will follow. That leaves suppliers less options and encourages a quality-guaranteed system.
Agree. That said, I expect I will only ever buy cars from Ford, BMW, Honda, and Volkswagen, who stood with CARB the last 4 years.
That'll be the key. If Ford alone tried this, they'd probably lose suppliers that would go elsewhere. But if most of the industry is doing it, then they don't have a lot of choice. It then just becomes the new paradigm for all (or most) of the industry.
Quite a bit to unpack here. I suspect that once you start thinking how this works out you'll realize that the tax credit is better than a price cut, and the "delay" in getting the tax credit is actually as good or better than the alternative
