Drive a Ford Vehicle? The Automaker Could Be Writing You a Check for $1,050


Lincoln's MKZ Hybrid is one vehicle for which Ford is writing checks to consumers. Source: Ford Motor Company

America's No. 2 automaker, Ford  (NYSE: F  ) , could be writing you a check shortly if you drive one of its vehicles. Sounds great, right?

Of course not, you know better. If Ford ends up writing you a check in an amount between $125 and $1,050, it's because your vehicle's miles-per-gallon rating hasn't been measuring up to its promise. Let's take a look at which vehicles' mile-per-gallon fuel efficiency has been overstated and the potential effects this could have on Ford's image and sales.

What happened?
There are many tests that go into estimating a vehicle's fuel-economy rating. Those tests include vehicle-specific resistance testing on a dynamometer, wind tunnel testing, and track tests. Ultimately, some of Ford's internal tests led to an error that overstated certain vehicle models' miles per gallon ratings, which weren't matched by those models in the real world.

How bad is it really?
You might remember a similar incident happened with Ford late last year when an investigation by the Environmental Protection Agency found that Ford's C-Max vehicle's miles per gallon rating was overstated. Ford mailed out rebate checks in the amount of $550 to owners of the model, but this recent incident looks to be a bigger problem.

The affected Ford models include the 2014 Fiesta, as well as 2013-2014 hybrid versions of the C-MAX, Fusion, and MKZ. The overstated miles-per-gallon even extends to the plug-in hybrid version of the 2013-2014 C-MAX and Fusion Energi.

All in all, Ford estimates that roughly 200,000 of these vehicles have been sold or leased to customers in the United States. If you're one of those customers and are interested in how large of a check Ford will be writing you, look here.

Will this hurt Ford?
Ford is often touted as the public's favored automaker, after it avoided a taxpayer fueled bankruptcy -- unlike its crosstown rivals Chrysler and General Motors -- but what impact might this have on Ford's image and sales?

It is a bit of an embarrassment for the folks at the Blue Oval, to be sure. Ultimately though, this isn't going to have any measurable effect on the company's brand image; these mistakes happen.

"Ford isn't the first manufacturer to admit that it was optimistic in its EPA fuel economy ratings, and it might not be the last," said Jack R. Nerad, editorial director at Kelley Blue Book told Reuters.

In terms of financial implications, the worst-case scenario would be that every single one of the 200,000 vehicles in this scenario was a purchased, rather than leased, Lincoln MKZ Hybrid. In that scenario Ford would be writing checks that combine for a total cost of $210 million. That might sound like a lot, but for context, Ford earned a pre-tax profit of $8.6 billion in 2013.

So, with no severe negative effects on Ford's image or financials evident, Ford's in the clear, right? Not exactly: The biggest negative impact will be felt in continuing sales of the vehicles under scrutiny.

Fuel economy continues to be one of the most important factors in a potential car buyer's decision to purchase. Any mistakes estimating those miles per gallon will have a negative impact on sales, just as it did when Ford lowered fuel economy estimates on its C-MAX. These mistakes could, as Fool.com senior auto analyst John Rosevear points out, make claims in earlier commercial ads worthless.

Consider that the revisions to the estimates are pretty significant for the Hybrid versions of the effected vehicles. Lincoln's 2013-2014 MKZ Hybrid goes from a combined city and highway rating of 45 miles per gallon down to 38. Ford's 2013-2014 Fusion Hybrid moves from 47 combined miles per gallon down to 42. It's worth noting that both of those hybrids have been exceeding Ford's sales expectations, and likely will feel a negative impact on sales.

All things considered, life will continue much the same for Ford and its investors -- though, some consumers might be wondering if their checks are worth their rides' disappointing fuel efficiency.

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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 June 21, 2014, at 4:52 PM, itsaobamanation wrote:

    cant hurt anymore the they are now eve the Camaro is whooping fords butt

  • Report this Comment On June 21, 2014, at 7:18 PM, Tommylee2 wrote:

    Why is Ford being singled out? I have never EVER had a car of any brand that lived up to the mpg claimed by the manufacturer. Zip. Zero. Nada. Nyet.

    None have ever sent me a check for their "error" in mis-advertising the mpg.

    To me, this makes Ford stand heads taller than all the rest by the fact that they are doing this with little or no complaint. They truly do value their customers and i will stand by them and continue to purchase their products.

    The writer of this article claims that fuel economy is still the number one buying factor but he is so so very wrong. If that were the case we'd all be cramming into one of those shoe boxes on wheels that Toyota makes or one of those death traps that General Motors is pushing. The REAL factors for buying a car are:

    1. Price (may not be #1, but certainly close)

    2. Reliability history (Who wants a car that is always on recall)?

    3. Comfort (If it don't fit, don't buy it).

    4. Style (We don't all want to drive a cookie cutter car).

    5. Fuel mileage. (It does enter into the buying, but not as the most important factor).

    If we ALL had bought GM products over the past three years we'd all be afoot wouldn't we, since they have had how many recalls now, five, six, seven?? More??

  • Report this Comment On June 22, 2014, at 9:01 AM, tiddledee53 wrote:

    I own a 2002 Ford Focus ZTS. Its a four cylinder engine with a 5 speed manual transmission. I get on then average of 35 to 40 miles to the gallon. I currently have 290,000 miles on the odometer and still running strong. I had to replace the alternator, the power steering pump and then Mc Pherson Strut steering mechanism. At 2 hundred thousand miles I replaced the timimg belt . That's always a good idea to do at 2 hundred thousand miles. Other than that every thing works and is fully operational. power Windows work, power door locks, AC, heater, moon roof with no leaks, remote, stereo, etc. This has been one of the best cars I ever bought, and I bought it used. Say what you want about FMC but this is a fine example THAT THEY DO AND CAN BUILD A VER GOOD PRODUCT. Maintenance is importance got to chance the oil regularly and rotate the tire, other than that Ford is the car you should be driving!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  • Report this Comment On June 22, 2014, at 1:40 PM, Pyramid wrote:

    MPG estimates are computer / dynamometer generated averages simulating actual driving habits are not real life factors. Actual MPG results are totally in the control of the driver. Sorry folks if you drive like your exiting pit lane at Indy no vehicle will meet factory projected MPG expectation.

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