Concerns Raised by Ford Workers Led to Criminal Emissions Probe

(Bloomberg) -- Questions first raised by Ford Motor Co. employees over the company’s emissions certification process that prompted an internal probe have now escalated into a criminal investigation by the U.S. Justice Department.

Ford said it learned of the government investigation in recent weeks and disclosed it Friday in a regulatory filing. Since it’s at an early stage, the company said it “cannot predict the outcome, and we cannot provide assurance that it will not have a material adverse effect on us.”

The probe makes Ford at least the third major automaker to fall under U.S. federal investigation over emissions in the span of a few years. Volkswagen AG paid a $4.3 billion penalty in 2017 for misleading regulators and customers about its diesel engines’ emissions. Fiat Chrysler Automobiles NV agreed to pay $800 million in civil penalties and other costs to resolve claims by the Justice Department and California that some of its diesel vehicles contained illegal emissions software to limit pollution during lab tests.

“Our focus is on completing our investigation and a thorough technical review of this matter and cooperating with government and regulatory agencies,” Kim Pittel, Ford’s group vice president of sustainability, environment and safety engineering, said Friday in a statement.

Ford shares shrugged off the disclosure following a better-than-expected earnings report Thursday. The stock jumped the most in a decade, rising 11 percent in New York trading Friday.

“The government can conduct investigations that are civil or criminal. It chooses criminal when it thinks it may find evidence that the company intentionally violated the law,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business.

Ford said that a handful of employees raised concerns last September through an internal reporting channel. That prompted Ford to then hire a company to help conduct a review, and also to notify regulators including the Environmental Protection Agency.

Voluntarily disclosing the potential lapse may help Ford avoid harsh penalties from regulators, according to John German, an independent auto industry consultant and emissions expert who helped uncover VW’s emissions cheating while at the International Council on Clean Transportation.

“It really hinges on whether there was an honest error in the modeling that someone within Ford brought up, or did someone try to cheat within Ford,” he said.

The investigation doesn’t involve the use of so-called “defeat devices” that VW was found to be using to game emissions testing, Pittel said. The company said it may have taken a flawed approach to calculating the effect of aerodynamic drag and tire friction on the fuel economy of its vehicles outside of testing labs.

It’s unclear whether the problems Ford discovered led to inaccurate mileage ratings. When Ford disclosed the issue in February, the automaker said “there’s been no determination that this affects Ford’s fuel economy labels or emissions certifications.”

Ford is first examining the 2019 Ranger pickup and expects to examine other models as its internal probe progresses, spokeswoman Jennifer Flake said. The investigation and technical review will take several more months, she said.

The EPA referred questions to the Justice Department, which declined to comment.

Ford has had fuel-economy issues before. It restated ratings on six models, including the Fiesta, and the C-Max and Fusion hybrid cars, in 2014 and sent checks for as much as $1,050 to more than 200,000 owners to compensate for their vehicles’ mileage shortcomings.

Hyundai Motor Co. and Kia Motors Corp. in 2014 were hit with a $100 million civil penalty after selling roughly 1.2 million vehicles with inflated fuel economy ratings. The inaccurate ratings stemmed from faulty procedures used by the companies to calculate road-load forces.

©2019 Bloomberg L.P.