Five Takeaways from the Latest Emission Mess Up

Last week Ford Motor Company admitted to more troubles with its emissions and fuel economy ratings. Though hardly the first automaker to admit emission testing problems, it’s not Ford’s first time in the bad-news barrel. In 2013 the company was forced to restate fuel economy ratings on a number of products and pay penalties to owners. Automakers from Asia, Europe and the U.S. have all had their certified ratings questioned and some have paid penalties similar to Ford. Someone always digs deep enough to shine a light on the core problem. In some cases, honest mistakes were being made. In others, the reality is worse. In the VW case, it was determined an elaborate, illegal engineering scheme had been developed to cheat the system and gain an advantage.

Ford’s public pronouncement on the latest fuel economy and emissions ratings troubles can be found in this press release. It’s a careful crafting of the facts, rinsed and cleaned by the lawyers. The entire announcement last week was a PR coup – the story was in the news for about 24 hours and then media moved on. It was everything Ford had hoped.

What did the analysts at Cox Automotive take away from last week’s announcement? Here are five points to consider.

1- The VW scandal is still echoing through the industry. By mid-2014, it was clear to more than a few people that VW was outright cheating on their emissions testing in the U.S. Eventually, the Environmental Protection Agency (EPA) agreed as well, and the agency came down on VW like the proverbial ton of bricks. When the VW mess was coming to light, most industry insiders expected the penalties to be harsh, as emission labels were generally under scrutiny and the EPA was looking to make an example of someone.

VW was the perfect target – big enough to be globally well known, small enough to have no major Washington D.C. influence. VW eventually paid billions in fines. So far, 13 people have been charged in the U.S. over alleged involvement in Dieselgate and multiple former executives are in prison. Even then-CEO Martin Winterkorn was taken down in the chaos. To this day, if Winterkorn sets foot in North America he’ll be arrested for conspiring to defraud the U.S. and violating the Clean Air Act.

With the VW emission scandal, as they say, it got real. The entire conversation changed. How? As Ford did last week, companies are now blowing the whistle on themselves, before anyone can come after them. Transparency is the new black.

2- Ford deserves kudos for being proactive and transparent. Ford, by any measure, is a massive, slow-moving company. It has 175,000 employees and operations around the world. And you can be certain of this: There were influential voices calling for this issue to remain internal, to fix it and not admit it. There always are. But transparency and honesty are the most important traits of any successful company and, accepting the first point above, kudos to the leadership at Ford Motor Company for doing the right thing. Too often the voices calling for silence and denial carry the day and the outcomes are worse.

3- This story is far from over. Ford got off stage quickly last week, but now the real work will begin. We can expect updates and further media coverage, all a distraction no auto company needs, especially Ford. The company has acknowledged there may be errors in the vehicle road load specifications used in their testing, but it likely knows exactly what those errors are. As one of the largest, most successful companies in the world, Ford doesn’t take chances and wouldn’t hire a third-party research company to go on a fishing expedition. Third-party involvement will help with transparency, but don’t expect any major revelations of criminal wrongdoing.

4- Automotive emissions and fuel economy testing is tough. The tests and formulas used to establish fuel economy and emissions certifications in the U.S., like everything in the car business, is wildly complicated. The road load specifications mentioned earlier: That’s just an example of the type of mathematical modeling required to deliver results. The tests are done in elaborate laboratories, using performance-grade 100-octane fuel in cars strapped to giant rollers. following a prescribed set of throttle inputs that only vaguely resemble real-world driving. There’s plenty of room for interpretation and system gaming.

5- CARB is important. Ford notes in their announcement that they have, “voluntarily shared these potential concerns with Environmental Protection Agency and California Air Resources Board officials.” That’s a big statement, as it reinforces what many people already believe: The California Air Resources Board (CARB) is the tail that wags the EPA dog. Fuel economy and emissions are a major automotive topic right now, with long-term targets for both being actively debated in Washington D.C. and across the country. The EPA is working to roll back Obama-era emissions targets and CARB stands in the way. It will be a battle. And there’s plenty of reasons to believe, in this case, the tail will prevail.