The EPA Catches Ford Red-Handed

Photo credit: Ford.

When Congress first enacted Corporate Average Fuel Economy, or CAFE, standards, the initial purpose was to reduce energy consumption by increasing the fuel economy of our nation's vehicles. While the policy has been in place since 1975, the standards are set to rapidly increase over the next decade. Its purpose is now twofold: to improve national security, and to save Americans money from the seemingly ever-increasing price of gasoline. And you can't overlook the environmental benefits from the reduced emissions.  

However, the rapid increase in standards that's now looming over the auto industry is putting pressure on them like never before. In 2025 the fuel economy of passenger cars and light-duty trucks built in that model year is set for an average of 54.5 MPG, which is nearly double what the comparable standards are today. Automakers are being forced to get ahead of the curve and invest in reducing fuel consumption now. And that's proving to be tougher than some automakers had anticipated.

In fact, Ford (NYSE: F  ) is now being forced to lower the gas mileage estimates for its C-Max hybrid crossover after it was found to not live up to previous estimates. The 2013 C-Max was touted as delivering 47 MPG of performance on both the highway and in the city. However, real-world performance hasn't lived up to those lofty estimates. Instead, after additional testing, the C-Max delivered 45 MPG in the city and just 40 MPG on the highway, for a combined rating of 43 MPG.

Those 4 miles per gallon are now going to cost Ford some money, too, as it will reimburse buyers with a one-time payment of $550, while lessees will receive $325. To date, Ford has sold about 32,000 of the vehicles, meaning that at most it's on the hook for $17.6 million. Given that Ford recently reported net income of $1.2 billion, that payment isn't likely to hurt the automaker.

What might hurt it are the additional investments it will need to make to boost the fuel economy of its vehicles in the future. The company has already said it's working on making improvements to boost the gas mileage of the model year 2014 C-Max hybrids. However, Ford might be required to redouble its efforts to improve fuel economy across its platform to meet the aggressive changes coming up in the CAFE standards.

This is clearly a setback for Ford, and it could harm the company's quest to catch up with top hybrid seller Toyota (NYSE: TM  ) . Its Prius has really resonated with consumers, making it a top-selling hybrid. Ford currently claims the No. 2 spot in the segment thanks to the rising popularity of its C-Max and Fusion hybrids. However, with the C-Max not achieving the fuel economy once thought, Ford could feel a big impact on future sales.

Admitting its mistake and reimbursing customers is a good start for the company as it looks to maintain its brand integrity. The next step, however, will be to simply deliver, which is easier said than done. 

Not only is this a big risk to Ford's brand, but it could have a major impact the performance of Ford's stock. However, while Ford might be stumbling early, this could prove to be a big benefit to the company as CAFE standards increase in the future. If you've thought about potentially profiting from Ford's stock, there are a few critical things that still need to fall into place. For a look at what they are, check out The Motley Fool's special free report titled "5 Secrets to Ford's Future," in which we outline the key factors every Ford investor needs to watch. Just click here now for your free report.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 18, 2013, at 9:56 AM, altereddoug wrote:

    If they gov is going to hold companies responsible for their claims, when are they going to hold themselves responsible?

  • Report this Comment On August 18, 2013, at 10:09 AM, birder1500 wrote:

    Ha, no car lives up to its reported fuel economy.

  • Report this Comment On August 18, 2013, at 10:13 AM, Zapmaniac wrote:

    Honda got caught doing the same thing with the Civic Hybred. Some lady sued them and got her money back.

  • Report this Comment On August 18, 2013, at 10:28 AM, Nuttys wrote:

    I drive a Toyota [Corolla] and I get better than what they say - 38 MPG combined.

  • Report this Comment On August 18, 2013, at 10:33 AM, Deseertdog wrote:

    Here's the real problem..."government" namely a bunch of Progressive fools ..writing more human and business rules, laws, regulations, and mandates, and taxes...They the progressive fools in government. When asked questions after doing wrong and getting caught ....O...they don't know anything ..hell they don't even know what the idiot next to them was doing...So these are the same idiots that are going to what...Save us from our selves...Progressive foolishness...

  • Report this Comment On August 18, 2013, at 10:41 AM, jims1950 wrote:

    first off, I drive a Lincoln town 26.5 on the highway and we have a grand marquis ls done 29-30 mpg documented. I have had gm cars and not one of them delivered the gas mileage stated. it was always less.

  • Report this Comment On August 18, 2013, at 10:44 AM, autoinsider wrote:

    I've driven rental Toyotas, Nissans and Hyundais. None of them came close to getting the stated mileage.

  • Report this Comment On August 18, 2013, at 10:54 AM, CBPGSquid wrote:

    Anyone check to see if the manufacturers are using real gas, or if they are using the lousy ethanol blends that most of us are forced to use? That could (does in my opinion) explain the differences if they are using straight gasoline.

  • Report this Comment On August 18, 2013, at 10:58 AM, jlclayton wrote:

    I bought a 4 year old Chrysler Concorde, which I drove for 7 years, and it was supposed to get 24 mph on the highway and 18 in town. Even during the last year, it always delivered the gas mileage it was supposed to

  • Report this Comment On August 18, 2013, at 11:01 AM, DouglasFairburn wrote:

    Tractor trailers have greater wind resistance and aerodynamic drag due to their size, while hybrid fuel cell powered vehicles are likely to have less power available to maintain performance. Both will benefit as aerodynamic efficiency for drag reduction improves. Using an aerodynamic ventilation method “AirChanneler” to increase base pressure has more potential, economically and environmentally, in solving these problems than with mechanical devices. The AirChanneler is an energy conservation method of reducing drag and increasing fuel millage.

  • Report this Comment On August 18, 2013, at 11:29 AM, xgcakasha wrote:

    the GM cars do not meet their mileage advertisements either, but Ford did not take bailout money so the government is targeting them as they have since bailout money was given to GM and Chrysler. Honda's mileage claims were accurate, it is a fact that some people do not know how to drive these hybrid cars properly to get the fuel mileage that they claim. what I think is funny is that none of these cars can even come close to the mileage that people were getting with the 1980s VW Rabbit diesels. The biggest problem is that cars are getting bigger again and all the dead weight added to them for the "safety" air bag junk and the bloated car sizes makes the cars heavier which in turn ruins the mileage. it is a know fact, lighter cars handle better, have better braking, and get better fuel mileage because they have decent amounts of power when using smaller engines. any car that gets less than 30mpg is nothing to brag about unless it happens to be a sports car.

  • Report this Comment On August 18, 2013, at 11:36 AM, xgcakasha wrote:

    another thing, using fuel with the ethanol blend or using E-85 fuel will decrease your mileage. running E-85 can cut your mileage almost in half. using cheap brands of gas will also lower your mileage.

    my car requires 93 octane fuel. I get the best mileage using either Sunoco or Shell. I lose 2-3mpg when I use Get Go...

  • Report this Comment On August 18, 2013, at 11:42 AM, GetReal13 wrote:

    Isn't that why it says on the sticker and commercials: You're mileage may vary?? I've bought 2500 hour light bulbs that didn't last that long, maybe I should sue for a refund.

    I drive a Fusion Hybrid(2010) that was advertised at 41 city and 36 highway. Under optimum driving conditions I get that mileage and sometimes more. But weather conditions, terrain, and climate control demands effect the mileage at different times.

    It is afterall called: ESTIMATED MPG!!

  • Report this Comment On August 18, 2013, at 11:58 AM, Nuttys wrote:

    I had to look it up. Corolla mileage is 26/34/29 so I'm getting better than what they said at 38. (Over 400 miles a tank).

    I've also had Fords, Don't remember the mileage, except my 2004 Freestar got around 20/22 mpg combined. (Which I traded in for my Corolla)

    Aside from that, my Fords seemed to always have a major mechanical issue around 120-130k miles.

  • Report this Comment On August 18, 2013, at 12:03 PM, southernshark wrote:

    I had a 1984 Diesel Mercedes that got about 20 miles per gallon......... it only weighed about 2 tons.

    Diesel has been the answer all along, but instead we push these expensive hybrid/gas solutions.

    Why????

    Because in 5 years your hybrid / gas engine will crap out on you.

    In 50 years the Diesel will still be running.

  • Report this Comment On August 18, 2013, at 12:06 PM, spawn44 wrote:

    I generally get better mileage that the EPA states.

  • Report this Comment On August 18, 2013, at 12:55 PM, peepee86 wrote:

    GOOD 17 mil good to give back to the people that supported the Ford Co. sorry for Ford, but come on, let's get moving.

  • Report this Comment On August 18, 2013, at 1:08 PM, rickinnev wrote:

    This is such a crock of crapola! Ford already makes and engine that produces 74 MPG..and VW makes one that produces 72 MPG. These are made here in the USA..BUT..not a single one of them goes in either makers car here..they are ALL sent to Europe. Mandated by the United States Government.

    Why? Think about the fuel tax at the pump..the Government likes to have Obama up there bee bopping around and running his mouth about Green this and Green that and I am going to do this and that..he does not want to loose the $$ at the pump.

    You can hide your eyes and sat,,"oh, not so" all you want.

    http://www.youtube.com/watch?v=L58Yw68Xv1M

  • Report this Comment On August 18, 2013, at 2:01 PM, TommyNorris wrote:

    Rented a Ford Escape which claimed better mileage. Even "driving the speed limit" I was only able to get as "high" as 24 MPG highway. WHAT? Such BS. I have to say their EcoBOOST = Eco-LIE! Also rented a Subaru Outback and a Toyota RAV4. Both got better than advertised numbers at well over 30 MPG. Ford of course will pull out the "your results may vary" trump card, but lies are lies. Liars will always be liars.

  • Report this Comment On August 18, 2013, at 2:01 PM, ScamuelJones wrote:

    Not only did they catch the lying Ford cheats "redhanded," but is also a bunch of lying scamming frauds in the cars they make. My five year old Ford has paint peeling and blistering on the top and hood, and they don't even care! It's costing $1300 to get painted and fixed! I've had 13 Fords in my lifetime, but I will NEVER have another one! BEWARE of FORD: Avoid them like AIDS unless you want to get cheated and scammed out of your hard-earned money!

  • Report this Comment On August 18, 2013, at 2:11 PM, stick375 wrote:

    I wish the EPA would take their CAFE standards and go suck on a tailpipe or smokestack.

  • Report this Comment On August 18, 2013, at 2:34 PM, damilkman wrote:

    In Europe a lot of cars have fuel usage gauges. I made a game to see how efficiently I could drive. MPG is also dependent on how people drive. If you are always gunning it out of a stop light or going 85-90 on the highway, or driving on tires with the psi too low, you will not get the factory MPG.

  • Report this Comment On August 18, 2013, at 3:49 PM, bobert1234 wrote:

    "Rented a Ford Escape which claimed better mileage. Even "driving the speed limit" I was only able to get as "high" as 24 MPG highway. WHAT? Such BS. I have to say their EcoBOOST = Eco-LIE! Also rented a Subaru Outback and a Toyota RAV4. Both got better than advertised numbers at well over 30 MPG. Ford of course will pull out the "your results may vary" trump card, but lies are lies. Liars will always be liar"

    Your driving style and traffic play a significant roll in your milage, it's unfair to get upset about the stated MPG on a rental car which you don't have much experience driving in a strange place you don't normally drive. Calling someone a liar based on such a small bit of data is unfair.

  • Report this Comment On August 18, 2013, at 4:56 PM, Nuttys wrote:

    Yahoo had a thing on it about vehicles that got over 250k miles.

    Toyota built vehicles were 6 of their 10.

  • Report this Comment On August 19, 2013, at 7:18 AM, danhale54 wrote:

    This is interesting; Now Yahoo calls me a "fool". It tells you a lot of what they think of their reader doesn't it? Apparently the only words worth any value is by Yahoo itself; anyone else is just a fool. They write articles like this all the time. It's either the bad big business not minding the government or articles on gay couples. I'll bet you find both today in Yahoo's list. The reader gets so tired of this poor excuse for content that they lash back in the comment section. Apparently Yahoo has taken notice. Those that don't care for this kind of crap are "fools". Oh wait; there are at least 17 articles on ultimate fighting today. We can't forget any of that very important news content. I didn't notice any global warming crap today. I wonder if I missed it or if they just forgot to put it in? Maybe we should write back to Yahoo and tell them they should consider some "rules". We don't need to be as derogatory; we could just call it "Yahoo's Rules of Content". We could say; No more gay marriage stuff, no more bad corporation themes, and certainly no more ultimate fighting and global warming articles. There's only so much one can take in a week. Here's an idea... maybe they could hire some journalist! You know; people who don't have opinions but, rather just write worthy news events. Just a thought...

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