Ford executives have unveiled big plans to improve profitability in recent years, but have long known they would face skepticism.

“Ford is in a bind with thin margins, weak growth and low valuations … and now is the time to break out,” CEO Jim Farley told investors last year. But even then, CFO John Lawler said, “We’ve told you this before … and we haven’t delivered.”

More than a year later, the US automaker is struggling to break that pattern.

Last month, Ford missed Wall Street’s second-quarter earnings expectations after it was surprised by an $800 million increase in warranty costs. Investors reacted by sending shares tumbling 18 percent, the biggest single-day drop since 2008. Then last week, Ford announced it would rethink its electric vehicle plans, abandoning a planned SUV worth up to $1.9 billion to convert it into a hybrid vehicle instead.

The double blow to a landmark of American auto manufacturing raises serious questions about strategy, execution and shareholder returns.

“Jim, you said Ford is a different company than it was three years ago,” Morgan Stanley analyst Adam Jonas told Farley at the earnings call. “But the stock market doesn’t seem to agree with you at all.” Ford’s price-earnings ratio, he pointed out, has fallen to 494th place in the S&P 500.

Industrywide, consumer demand for electric vehicles has cooled, and automakers are no longer benefiting from the pricing power that supply shortages gave them after the pandemic. Inventory on dealer lots is growing, and discounts are increasing as new vehicles become less affordable due to high interest rates.

But Ford has felt the impact more than others: The stock has lost 56 percent since its post-pandemic peak in January 2022, while rival General Motors has fallen 31 percent over the same period.

Farley is trying to implement a plan introduced in 2021 aimed at cutting costs, improving quality, increasing revenue from digital subscription services and achieving an adjusted operating margin of 10 percent by 2026. But last month he acknowledged that Ford’s realignment would come with “growing pains.”

When Ford abandoned plans for a three-row electric SUV last week, the company said the model had failed to reach its profitability target within a year. Ford also announced it would reduce the share of investments in electric vehicles from 40 to 30 percent and move some battery production from Poland to Michigan to take advantage of U.S. tax breaks.

Ford had already cut production of the F-150 Lightning, the electric version of its flagship pickup truck, and announced last month that a Canadian plant originally intended to produce electric versions of the Ford Explorer and Lincoln Aviator would instead produce gasoline-powered Super Duty trucks.

However, the company had to back away from its previous goal of turning a profit on electric vehicles in 2026, reporting a loss of $1.1 billion in the second quarter. “Overall, the electric vehicle journey has been a humbling experience,” Farley said.

Its hopes of getting a handle on costly quality problems have also proven false. Ford has set aside more and more money for vehicle warranty repairs over the past decade, from $4.8 billion in 2014 to $11.5 billion in 2023. The amount Ford actually pays out each year for repairs has also increased, from $2.9 billion to $4.8 billion.

As Farley detailed the warranty expenses, Bruno Dossena, an analyst at Wolfe Research, asked, “How can investors really have confidence in earnings performance when there are surprise warranty issues every year?”

The recent issues related to a guarantee challenge, which Barclays analyst Dan Levy called “frustrating for investors,” affect models that were launched as early as 2016.

“It’s clear that there was a time when the robustness wasn’t as good as it needed to be,” Lawler said.

Farley said quality is the company’s “top priority,” which is why it has streamlined approval processes for new models and hired an executive from market research firm JD Power two years ago to lead quality initiatives.

The focus was on improving quality when launching new models, as Ford has seen an average increase of 70 percent in defects following the launch of new vehicles over the past five years, compared to an industry average of 20 percent.

This year, for example, the company delayed the launch of 60,000 F-150 and 21,000 Explorer SUVs to test them more thoroughly for problems. That approach reduced defect rates to industry levels or below and avoided about 12 potential recalls, Farley said.

Ford is also working with dealers to resolve quality issues. Dave Veenendaal, service and parts manager at Haggerty Ford in the Chicago suburbs, said the automaker has required dealers for about a year to report problems with vehicles customers bring in within three months of purchase. The idea is to identify recurring problems, trace them back to the production line or development source and fix them, rather than continuing to ship vehicles with defects.

“Let’s say a car comes out of the factory or has been with a customer for less than a month and we notice that a cable needs to be repaired,” Veenendaal said. “Ford wants to know about it immediately.”

Quality is improving, Farley told analysts last month, citing a JD Power survey that tracks the number of problems new owners experience per 100 vehicles in the first 90 days of purchase. The results showed Ford moved from 23rd to ninth in the industry in “initial quality.”

The company examines diagnostic codes and tests vehicles until they fail. In doing so, “we discovered many, many problems in our industrial system that we were able to fix before we released the vehicle,” Farley said.

It would be “painful” not to deliver the vehicles to dealers before the end of the quarter, thereby hurting the company’s profits, he added: “But … this is, in our view, the only way to get our warranty expenses under control.”

The fact that warranty costs can also come from vehicles produced years ago makes them a “particularly vexing problem for management,” said Steve Brown, an analyst at Fitch Ratings. Ford is currently going through the vehicles “with the utmost care,” he said, but it will be several years before investors and car buyers know whether the increased testing was worth it.

The second quarter was “very disappointing,” said Morningstar analyst David Whiston, but Farley’s attempt to revamp product launches “is the right thing to do, even if it leads to volatile earnings.”

Buying back shares would reassure investors in the meantime, Whiston said. General Motors announced in June that it would buy back $6 billion worth of stock, in addition to the $10 billion in buybacks it committed to late last year.

But buybacks are rare at Ford because the Ford family favors dividends and holds 40 percent of voting rights through Class B shares, worth 2 percent of total equity. At last month’s analyst conference, Farley told investors the automaker has better ways to spend its capital, such as by investing in Ford Pro, its commercial-focused business.

The lack of news of buybacks contributed to the share price slide last month, said Morgan Stanley’s Jonas, who said the executives’ comments appeared to “lack the same sense of contrition that was expressed in recent earnings calls.”

“Investors were hoping Ford would open the hood on the buybacks,” he said. “At least they slammed it shut on this call.”