Recalls likely to impact Ford,GM’s brand image

US-based carmakers Ford and General Motors (GM) may face the challenge of poor brand perception among Indian consumers

US-based carmakers Ford and General Motors (GM) may face the challenge of poor brand perception among Indian consumers and are likely to see booking cancellations as manufacturing and design defects get discovered in newly launched cars,sector consultants and industry executives said. As their image takes a hit,competitors,such as Honda,Renault,Maruti Suzuki and Hyundai,stand to gain.

On Thursday,just two weeks after the June 26 launch of the EcoSport,Ford announced the recall of 972 units of the cars diesel variant to fix a component used to heat and start the engine. We discovered a potential concern with EcoSport diesel variants related to the glow plug module,which requires relocating it. We are contacting customers to take their vehicle to their Ford dealership to have the work carried out, a Ford statement said.

Fords announcement comes close on the heels of GM stopping production (in early June) of the diesel variants of both the Sail sedan and hatchback (U-Va) models and the Tavera MPV because of problems with the engine discovered during random checks on the assembly line. The Sail sedan was launched in February this year while the hatchback was launched in November last year. Now,GM may follow Ford with a recall notice by next week. We are investigating if we should issue a recall. We will make an announcement next week, P Balendran,vice-president at GM India,said.

VG Ramakrishnan,managing director at Frost & Sullivan,South Asia,said the companies will have to spend a lot of effort in communicating to the customer in order to have minimal negative impact on the brand. Some customers would look at cancellations,thinking why buy a car with problems. It’s a tough call for the Ford management,but credit is due to them that they took this call to preserve long-term credibility. This will be used by competitors, he said.

This was confirmed by two Ford dealers,who told FE they were worried about the EcoSport recall,especially since the diesel variant has the lion’s share of the about 20,000 bookings for the EcoSport. They said that a few customers had called up on Friday asking for cancellation of the booking and a refund of the R50,000 downpayment. Buyers could shift to other products like the Renault Duster and Maruti Dzire,which so far have had a clean run.

Puneet Gupta,principal analyst,IHS Automotive,added that such problems should have been discovered during the testing stage of these cars. Companies try to give a competitive price,which sometimes causes problems in quality. It definitely creates a bad impact and poor brand perception. This is something that both Ford and GM could have done without,especially in difficult times. OEMs have to quickly rectify these issues, he said.

The product recalls,so early after the launch,are seen as a big challenge for both Ford and GM who have been posting losses in India (Ford has accumulated losses of R1,344 crore) and are now trying to build market share in a segment dominated by Maruti Suzuki and Hyundai. The EcoSport was touted as a comeback car for Ford,competing with the top-selling models in the country like the Maruti Swift and Dzire. GM’s Sail and U-Va also targeted the same Maruti models.