Ford Says Its Quality Is Improving; Why Is This Number Going in the Wrong Direction?

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14 hours ago

Ford checked in just below industry average in J.D. Power's 2025 Initial Quality Study.
The auto industry has gradually experienced more problems with new vehicles.
Ford's quality improvement will take time to see as new vehicles replace old models.
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One of the big knocks against Ford Motor Company (NYSE: F) over the past few years has been its recalls, and the sometimes higher warranty costs associated with them. When automakers such as Ford have a large recall, which sometimes requires customers to bring vehicles in for service, it can ring up a hefty bill on its financials.
In the past, the warranty costs spiked enough to hinder the company's earnings. Ford's stance has been that it's made substantial improvements on quality, but if that's the case, why isn't it scoring better in J.D. Power's 2025 Initial Quality Study? Let's dig in.
J.D. Power's Initial Quality Study (IQS) is in its 39th year and collects responses from over 90,000 customers of 2025 new vehicle models, who were then surveyed after 90 days of ownership. The study's goal is to gauge how many problems per 100 vehicles, sorted by brand. It's a simple way to evaluate the quality of new vehicles, with the lower the score, the better.
And this year's winner is, drum roll: Lexus (owned by Toyota)! Lexus was the highest-ranking brand overall in the study, with a score of 166 PP100. For premium brands, Lexus was followed by Jaguar and Genesis, with respective scores of 175 PP100 and 183 PP100.
For mass-market brands, Nissan might have shocked a few investors in ranking highest, or scoring lowest, at 169 PP100. Hyundai and Chevrolet (part of General Motors) rounded out the top three for mass-market brands with scores of 173 PP100 and 178 PP100, respectively.
Now, gathering all of a parent company's brands under their respective umbrellas -- for example, General Motors owns brands Cadillac, Chevrolet, Buick, and GMC -- the OEM with the most model-level awards was GM with five, followed by Ford with four, and Honda with three.
Now let's take a closer look at Ford and see if we can extrapolate any IQS data for perhaps a preview of future issues and potential recalls.
As you probably noted in the graphic, Ford checked in just below industry average. That's respectable and raises no red flags, but it's worth glancing through some history to better understand trends. Ford's score of 193 PP100 in 2025 was noticeably worse than last year's score of 178 PP100, which was good enough to rank in the top third of all brands.
Taking it a little bit further, let's rewind the clock to 2020, when Ford scored an even better 174 PP100. In 2015, Ford scored a far better 107 PP100. This brings up an important question: Is Ford's vehicle quality really improving? And if it isn't, should investors expect rising warranty costs and hindered earnings?
Not so fast!
There are a couple of important factors to consider before jumping to conclusions regarding Ford's trending scores. First, the industry average has moved in similar a similar trend line. That's because over the past decade, vehicles have grown far more complex in terms of innovation, driver assistance systems, and infotainment services, among others. As those new technologies debut, rarely does it happen without initial problems that eventually get worked out over time.
Second, we also have to consider the severity of these problems. J.D. Power noted that the infotainment category remains the most problematic vehicle category. In fact, half of the top problems industrywide remain infotainment issues.
Another consumer issue: cupholder size. That's right, one of the biggest and most reoccurring complaints is that the size of cupholders often doesn't fit reusable containers.
Ford won't miss earnings this quarter because of infotainment system or cupholder size recalls. The J.D. Power study scores aren't likely correlated to recalls, or accompanying warranty costs, because it's looking for initial problems within the first 90 days -- not a time frame there's likely to be a major repair/recall needed.
Does this study have value? Absolutely. It's a wonderful resource to gauge consumer feedback on new vehicle models that will become the bloodline of automakers. But can we take Ford's worsening scores to mean that its vehicle quality isn't improving, at least the important things (looking at you, cupholders)?
No, not in my opinion. It takes time for Ford's more recent push on quality to work through the process, and for newer cars to replace older, more problematic models.
At the end of the day, while investors would love to see Ford improve year after year and even overtake Lexus at the top, these scores don't raise any real red flags when it comes to potential recalls or potential earnings hits.
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Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.
Ford Says Its Quality Is Improving; Why Is This Number Going in the Wrong Direction? was originally published by The Motley Fool