Ford lowers fuel economy rating on C-Max hybrid 8.5% to 43 mpg

DETROIT -- Ford Motor Co. is cutting the stated fuel-economy rating of its C-Max Hybrid car 8.5 percent to 43 mpg from 47 mpg -- a rare and costly move that Ford spent months feverishly working to avoid.

Ford has faced heavy criticism and lawsuits about worse-than-expected fuel economy for several new models, including the C-Max, whose window stickers have advertised 47 mpg for city, highway and combined driving. The ratings are based on tests Ford conducted and data it submitted to the EPA.

The company and EPA said the new rating on the C-Max will be 43 mpg combined, 45 mpg city and 40 mpg highway.

Ford said today it will provide $550 to U.S. customers who purchased a C-Max and $325 to customers who have leased the vehicle. Some 32,000 C-Max owners are eligible for the payments, Ford said. Pricing for the C-Max hybrid starts at $25,995, including shipping.

C-Max customers will be notified by mail, Ford said, while dealers will relabel vehicles that remain unsold on lots.

U.S. sales of the C-Max this year have totaled 23,040 through July -- helping to boost Ford Motor Co.'s U.S. share of the alternative-powered vehicle market to 15 percent through July from 4 percent in the same period last year.

The EPA says it is not taking further action against Ford.

"Ford did not do anything illegal," Christopher Grundler, the head of the EPA's transportation office, said in an interview with Automotive News. "This is not an enforcement matter," he added.

In its initial public statement, the agency partly blamed its own fuel-economy labeling rules for cars -- some of which date to 1977 -- and pledged to update them.

Grundler said the agency will gather comments and update the labeling rules so they better reflect industry trends. As car companies have started selling more nameplates using the same powertrain, and cars have gotten more efficient, the risk of a discrepancy like the one found in the C-Max has grown.

He said the EPA could decide to make broader changes to fuel economy testing and labeling, if automakers and consumer advocates came to the agency with other ways to bring fuel economy estimates closer to real-world mpg.

"I know we have a common cause with automakers, based on the feedback I've already gotten," he said. "The automakers agree that preserving the integrity of these fuel economy labels is a paramount concern."

The EPA has not given any time frame for its rule updates.

No changes to Fusion hybrid

Ford officials said today the company used mpg tests on the Fusion hybrid sedan to generate the fuel economy label for the C-Max. It was allowed under EPA rules but Ford said it plans to test C-Max separately going forward.

Ford has no plans to change the mpg ratings on the Fusion hybrid, company officials said.

"This is an industrywide issue with hybrid vehicles," Raj Nair, head of global product development for Ford, told reporters today. "We've learned along with EPA that the regulations create some anomalies for hybrid vehicles under the general label rule."

Ford's move shows the high stakes surrounding fuel economy in today's car market, where buyers are more sensitive to high gasoline prices and the Obama administration is requiring automakers to meet stricter mileage standards.

"There are customers that are above the" 47 mpg number, Nair said. "There are customers that are below the number. We take the customers that are below the number very seriously."

Ford is the second automaker to back down on lofty fuel-economy claims in the past year under pressure from the EPA. Hyundai and its Kia affiliate in November agreed to change the labels on most of their models after the agency discovered that the brands had submitted flawed results for one of the tests used to calculate fuel economy numbers.

All four Hyundai and Kia nameplates that had been advertised as getting 40 mpg in highway driving received new labels showing 36 to 38 mpg.

Hyundai and Kia offered customers of 900,000 vehicles prepaid fuel cards for compensation. In January, Bloomberg reported that Hyundai set aside about $225 million and Kia about $187 million to cover the reimbursements.

Blow to Ford's image

Cutting the C-Max Hybrid mileage ratings is a blow to Ford's carefully cultivated image as a fuel economy leader, a core tenet that CEO Alan Mulally has emphasized since joining the company in 2006.

Ford used the 47-mpg number as the centerpiece of its C-Max advertising. Beginning in October, it aired a series of playful animated ads that pitted the C-Max against the rival Toyota Prius V. In addition to better fuel economy, Ford boasted the C-Max was more fun to drive than the Prius, as well.

But Ford's mileage claims soon ran up against the real-world experiences of customers. At least two class-action lawsuits were filed against the company on behalf of consumers who alleged that Ford misled them with fuel economy claims.

One of the suits, filed in California, was dropped in February. Another suit, filed in Massachusetts, is awaiting a hearing.

The Ford Fusion and C-Max hybrids fell 17 percent to 21 percent short of Ford's promise of combined 47 mpg in testing last year by Consumer Reports magazine, which uses a different testing cycle than the EPA. The Fusion achieved 39 mpg and the C-Max averaged 37 mpg in tests of city and highway driving, the magazine found.

Other hybrids also fell short of their manufacturers' claims, Consumer Reports said, but none more so than the C-Max and Fusion.

The Toyota Prius, with a combined rating of 50 mpg, is the only non-plug-in nameplate with higher EPA fuel-economy than the C-Max and the Fusion, which is also rated at 47 mpg, according to FuelEconomy.gov, a Department of Energy Web site. The Prius is smaller and lighter than the C-Max and Fusion.

Retrofitting C-Max

Ford has been on the offensive for months and promised to cooperate with the EPA to find a better testing standard for hybrids.

In December, Nair acknowledged that customers' fuel economy could vary depending on factors such as weather and individual driving style. He also said the C-Max had been set up to emphasize sporty driving.

"It is important to note that we have designed our hybrids to drive exactly the same as all our other vehicles, with the global Ford DNA," Nair said. "A key part of that DNA is 'fun to drive.' We could have detuned the vehicles to maximize fuel economy like some of our competitors have done, but it would have been at the expense of a fun driving experience."

Nair said he "consistently" achieves the stated ratings on Ford's hybrids when he drives in a manner to maximize efficiency but admitted "that's not the way I usually drive."

Last month, Ford said it planned software modifications for 2014 to improve the fuel economy of its hybrids. The changes include increasing the maximum speed the cars will go on electric power only, adjusting automatic grille shutters to reduce drag and adjusting electric fans and climate control systems to lower energy consumption.

Without those changes, the EPA said in a report on its audit, the C-Max would have deserved lower fuel economy ratings: 42 mpg city, 40 mpg highway and 41 combined. That would have caused the C-Max to fall behind the Prius V with its 42 mpg combined rating.

Ford said today it also plans several other engineering changes to the 2014 C-Max scheduled to go on sale in December:

• Gearing changes to enhance transmission drive ratio
• New hood seal, front and rear tire deflectors, A-pillar moldings and the addition of rear lift gate deflectors to improve aerodynamics
• New engine oil with reduced friction

Alec Gutierrez, a senior analyst at researcher Kelley Blue Book, said that sales of the C-Max may temporarily dip, but he expects the new label to have little effect on Ford's overall U.S. sales. Hyundai and Kia sales have remained steady since last year, despite those brands' relabeling push.

Gutierrez said the bigger challenge for Ford will be appeasing C-Max owners as Hyundai and Kia did with owners by reimbursing them for gasoline.

"They can't fall short of Hyundai and Kia's response," Gutierrez said. "They're going to have to take care of those consumers who bought the car -- and perhaps made the choice to not buy a Prius, or some other hybrid, because of Ford's lofty claims."

David Phillips contributed to this report.

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