Ford (F) is set to report its third quarter earnings after Monday's closing bell, and Autolist editor-in-chief David Undercoffler joins Seana Smith on Catalysts to discuss what investors can expect.

While demand for electric vehicles has been sluggish, Undercoffler believes that it won't be a "make-or-break case" in Ford's earnings. Rather, he argues that "the elephant in the room is quality control":

"They have got to get warranty costs and recall costs under control. They recalled the most number of vehicles in 2022. They were almost number one in 2023, they're second so far this year. Last year, Bloomberg estimated that recall costs were $4.8 billion. For Ford, that's huge amounts of money... Q2 warranty costs were $2.3 billion for Ford. So these are sort of unforced errors that they've really got to get under control before they can sort of look at anything else."

Undercoffler adds that Ford CEO Jim Farley is in a difficult position, noting that efforts to address these issues could take months or years to materialize: "We're talking about changing or adapting your manufacturing processes, your quality control. So it could be a while."

However, it's not all bad news for Ford. Undercoffler notes that its fleet and commercial division performs well, and that the Ford Credit financial services segment has good profit margins.

"In terms of the products themselves, there are definitely some highlights. The Ford Ranger is all new, that's sort of an affordable, higher volume. The Ford Explorer has been refreshed, that's going on sale right now. They just introduced the new Ford Expedition that will go on sale, that's a fatter margin on that vehicle — completely been redesigned. So there are bright spots for sure."

Catch Morningstar US autos equity strategist David Whiston explain to Yahoo Finance why General Motors (GM) continues to outperform Ford.

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This post was written by Melanie Riehl