Ford Lowers Mileage Ratings on Hybrid Cars for a Second Time

Jun 12, 2014 5:22 pm ET

(Updates with previous restatements starting in the 14th paragraph.)

June 12 (Bloomberg) -- Ford Motor Co. lowered fuel-economy estimates on some of its cars for the second time in less than a year, citing a computer-modeling error, and promised to compensate more than 200,000 customers.

Six models are affected, including the C-Max Hybrid, which is now rated at 40 miles per gallon, the Dearborn, Michigan- based company said in a statement today. That’s down from an estimate revised lower last year to 43 mpg from 47 mpg.

“This is our mistake, plain and simple,” Raj Nair, Ford’s product development chief, said on a conference call. “We are apologizing to our customers.”

Payments to customers will be as much as $1,050 to owners of the Lincoln MKZ Hybrid and as little as $200 to owners of the Fiesta with a 1-liter engine, the company said.

Ford has heavily promoted fuel economy in advertising, citing high numbers to help sell hybrid models like the C-Max, said Michelle Krebs, an analyst with AutoTrader.com, a car research website.

“There is a real hard push to get as high a number as possible” on the window sticker, Krebs said.

Other models affected include the Fusion Hybrid, the C-Max Energi and the Fusion Energi plug-in hybrids.

“There was certainly no intent to mislead anyone,” Nair said.

EPA Requirement

Ford discovered an error in October on a single model, Nair said. By March, the company had confirmed a mistake in the software it uses to generate the U.S. Environmental Protection Agency estimates.

Nair declined to estimate how much Ford would spend on the payments to customers. The amount won’t have a material impact on the company’s financial performance, he said.

The EPA said it’s requiring Ford to correct the estimates. The agency oversaw Ford’s program to retest its entire fleet and confirmed the corrected results, it said in a statement.

Ford has agreed to implement more stringent validation tests under EPA oversight, the agency said. Cars on dealer lots will get new labels.

“The issue highlights the need for continued strong oversight of the fuel-economy labeling program,” Chris Grundler, director of the EPA’s office of transportation and air quality, said in a statement. “Consumers need to trust that fuel-economy window stickers are giving consumers reliable and fair estimates of real-world fuel economy.”

Erroneous Inputs

EPA mileage estimates are based on a standardized set of maneuvers to mimic city and highway driving in a laboratory, using a car on a dynamometer. Automakers simulate the test course using software, then verify the results with actual cars, Nair said.

After investigating some anomalies, Ford engineers discovered its model had some erroneous inputs, which have now been corrected and verified by the EPA, Nair said. Hybrids are particularly sensitive to one variable called total road load horsepower, he said.

Ford faced an earlier consumer backlash over its original 47 mpg claim for the C-Max Hybrid. Consumer Reports magazine said its drivers were averaging 37 mpg, 21 percent short of the rating. Some C-Max and Fusion Hybrid owners filed a federal lawsuit in Philadelphia over being sold “under-performing, less valuable vehicles that inflict higher costs on their owners.”

Hyundai, Kia

Other automakers have received complaints about the mismatch between EPA labels and real-world driving. Consumer Reports said last month the 2014 Honda Accord Hybrid averages 40 mpg, compared with a window-sticker rating of 47 mpg.

Hyundai Motor Co. and Kia Motors Corp. relabeled most of their top-selling U.S. models in November 2012 after discovering testing errors.

C-Max sales fell 24 percent last month to 2,833 models, from 3,711 the previous May. Through the first five months of the year, C-Max sales are down 38 percent, according to researcher Autodata Corp.

“We’ll be watching market impact very closely,” Nair said.

Some 28 percent of shoppers on AutoTrader in May, up from 15 percent in January, considered fuel-efficient vehicles because of gasoline prices. Interest tends to pick up whenever costs at the pump rise, Krebs said.

“I don’t think it will hurt Ford, especially since they are handling it this way,” Krebs said. “Writing a check to consumers goes a long way toward making them happy.”