Ford set for $500m repair bill

The saying "Where there's smoke, there's fire", is not a favourite among Ford executives just now.

After trying for six years to quash claims that its cars were prone to mysterious self-immolation, Ford admitted last week that the problem was real and initiated the biggest-ever vehicle recall by a manufacturer. No fewer than 8.7 million cars sold in the US and Canada between 1988 and 1993 are to be repaired.

The culprit is an ignition switch manufactured for Ford by an outside supplier, United Technologies Automotive. A too-narrow gap between two terminals inside the component has been blamed for causing short-circuits, overheating and, occasionally, full-blown fires.

Although the recall is voluntary, pressure on Ford had been mounting rapidly from the US government and the insurance industry. There had been 1,100 unconfirmed reports of ignition fires in the US and another 900 in Canada. Flames have engulfed cars both in motion and while stationary and unattended.

While no deaths have been blamed on the fires, two lawsuits were initiated earlier this year by people claiming to have sustained injuries from burned fingers to smoke inhalation. Some property fires have been blamed on the company, arising from instances when cars in garages ignited and destroyed adjacent homes.

How expensive the recall will be for Ford is not clear. While it is likely to cost between $50 (pounds 33) and $100 to install new switches in each affected car, not every owner will necessary respond. Normally only about two- thirds of vehicles targeted for recalls are actually taken to dealers for the necessary work. The final bill could be between $300m and $500m.

Ford, in common with other manufacturers, keeps contingency funds for warranty-related costs, so the operation may not effect quarterly profits. The impact may also be offset by an expected rise in demand for new vehicles in North America in the coming months.

For Ford owners, the recall means considerable hassle. Most Ford vehicles made during the relevant period are affected, including the US version of the Escort, Mustangs, Thunderbirds, Crown Victorias (a favourite with US police departments), Lincoln Town Cars and Aerostar minivans. Also in the net is the F-series pick-up truck - the biggest-selling vehicle in the US between 1988 and 1991.