Firestone Recall a Near-Term Negative for Ford
DEBORAH MARCHINI, CNN ANCHOR: The Firestone tire recall has resulted in that production halt by Ford Motor.</s>DAVID HAFFENREFFER, CNN ANCHOR: And joining us now to look at the anticipated impact on Ford's earnings and possibly its stock, as well as the auto sector in general, Christine Romans.</s>MARCHINI: Hi.</s>CHRISTINE ROMANS, CNN CORRESPONDENT: These plant closures are going to result in a reduction of truck output by 25,000 in the third quarter. They're freeing up some 70,000 tires. The Explorer is such a popular model, it's so interesting, Ford was aiming to sell 42,300 Explorers this month. Right now, it looks like those sales are down about 10 percent. The stock impact, the stock closed yesterday, Ford stock, down about 50 cents, 27.25 was the level. Some folks are saying this could be a near-term hang on Ford's shares, as people anticipate maybe what analysts say could be a three cent charge in the third quarter. Others say, though, that they think that maybe it will be negative press in the short run, but in the long run, Ford shares will be all right. Merrill Lynch says we don't think it'll have a lasting impact. And our view is that Ford remains relatively attractive. Let's take a look at how some of these stocks have fared over the past year. Year-to-date, actually, Ford down 6.7 percent, GM down 6.8 percent, DaimlerChrysler down 30.4 percent on the heels of that merger that is still being processed and digested by the markets. So we'll be watching Ford shares to see what the impact is today and nearer-term it's definitely a stock to watch. But these auto shares haven't been doing so great this year already anyway.</s>MARCHINI: And, it's kind of remarkable, because we've been running at close to or about 17 million units, which is a record pace for autos sold in the United States, yet the stocks are hovering around 52-week lows.</s>ROMANS: People keep buying these cars. And you're right, it's a total extension of pretty good consumer demand, a very good economy. It will be interesting to see how Ford weathers this, you know, 25,000 reduction -- or output reduction. So it'll be interesting and it will be interesting to see if analysts change their views about just what the impact will be in the third quarter. But that Bridgestone/Firestone recall really sort of trickling through here.</s>HAFFENREFFER: Has Ford spelled out exactly what they expect the impact to be on their bottom line already? or is this simply the analysts sort of digesting this?</s>ROMANS: The analysts, it's the analysts who are digesting what they think the charge will be. The company has not said what they think the charge will be. But the company had been the saying that it had aimed to sell 42,300 Explorers this month. And that it's already, you know, seen about a 10 percent sales drop off. But overall they say that maybe it might just be a very short term -- analysts say that maybe this month and next month we could see the impact for Explorer sales, and then it will rebound.</s>MARCHINI: Talking to the president of General Motors last week who said they had not seen any impact on their sales, from a reduction in the sales of Ford Explorer. So do we have any idea what people are doing?</s>ROMANS: No, no idea yet, whatsoever what's going on. I mean, it's interesting to see whether there will be a short-term pullback in Explorer demand. But this, as the company says, this is not an Explorer image problem, this is a tire problem. So people still want Explorers. They just don't want those tires on them.</s>MARCHINI: They may just be willing to wait rather than buy some other vehicle.</s>ROMANS: Precisely, precisely.</s>MARCHINI: Thank you, Christine.</s>HAFFENREFFER: Thank you, Christine.