Ford Recalls in Brazil – Analyst Blog

Ford Motor Co. (F) has announced its plan to recall 166,000 vehicles in Brazil in order to fix a problem with their electrical wiring. The recalls included the domestically made subcompact Novo Ka models of 2008–2010. Ford has discovered the faulty wiring to cause short circuits and even fires in the engine compartment in an extreme case.

 

With a 10.1% market share in Brazil, Ford is the fourth-largest automaker in Latin America’s largest economy. The prompt response of Ford to the problem is, therefore, not unexpected.

 

Last month, Ford announced its plan to invest $200 million in the country over the next 5 years on top of an investment of $2.2 billion announced last year. The new investment is aimed at developing a new Ford EcoSport small sport utility vehicle for the global market.

 

So far, car sales in Brazil have been significantly helped by government tax incentives that lowered car prices and lured consumers to showrooms. But the tax breaks expired last month and the government has no plans for renewal. However, the investment will allow Ford to achieve state and federal tax breaks from the Brazilian government until 2015.

 

In 2009, Brazil’s auto sales rose 11.4% to 3.14 million vehicles. In contrast, Ford’s sales increased 16.9% to 304,007 vehicles in the country. According to the Brazilian automobile dealers’ association, automobile sales in the country are expected to grow 9% in this year.