Starkman: Why Ford’s Paltry $19-Million Settlement for Advertising Dishonesty Is a Very Big Deal

June 02, 2022, 5:15 PM

The writer, a Los Angeles freelancer and former Detroit News business reporter, blogs at Starkman Approved

By Eric Starkman

Liar, liar, pants on fire!

If I were Tesla-founder Elon Musk, that’s what I’d tweet at Ford in the wake of the company’s $19.2-million settlement with 40 states and the District of Columbia for deliberately exaggerating the real-world fuel economy of its 2013-14 C-Max hybrids and the payload capacity of its 2011-14 Super Duty pick-up trucks. Unlike Tesla which doesn’t spend money on advertising and PR, Ford spends millions to peddle its vehicles and lied through its corporate teeth to gain an edge.

You’re forgiven if you have no clue what I’m talking about. Most of the media didn’t cover the settlement, including as best I can tell the Detroit Free Press, which views Ford’s PR department as its primary competitor. The News, to its credit, covered the story and noted that Michigan isn’t among states that will benefit from the settlement. 

Nessel spokeswoman Amber McCann said in an email that the decision not to participate in the multistate settlement was made by Republican Bill Schuette, who Nessel succeeded. McCann said a Michigan Supreme Court decision regarding the scope of Michigan’s Consumer Protection Act hampers Nessel’s ability to take any action against Ford.

Ford’s settlement was negotiated and announced last week by Iowa Attorney General Tom Miller, who obviously was no match for Ford’s crack legal department. The settlement is piddly for a company that made $17.9 billion last year on $136 billion in revenues. Ford CEO Jim Farley, who was awarded $23 million in compensation in 2021, could pay the settlement out of his own pocket and still be left with $4 million, admittedly making him a pauper compared to the $29 million GM CEO Mary Barra received.

Iowa AG Tom Miller (Photo: Twitter)

It's no surprise why Miller’s office couldn’t muster a penalty that would cause Ford some real pain. Check out the credentials of Steven Croley, the general counsel Ford hired last year. Croley, on paper at least, is one of the best-credentialed in-house corporate legal chiefs in the country. 

Ford’s PR people are as shameless as their advertising colleagues. In an emailed statement to The Detroit News, spokesperson Cathie Hargett touted that Ford’s settlement didn’t include an admission of wrongdoing.

“We are pleased that the matter is closed without any judicial finding of improper conduct,” Hargett said. “We worked with the states to resolve their concerns and in the process limited additional investigative costs and legal expenses for all parties.”

Hargett is welcome to cheer that on a strictly legal basis Ford got off scot free, but here’s what Miller had to say about Ford’s behavior.

“Consumers place a premium on fuel-efficiency when shopping for new vehicles,” Miller said in a news release. “For years, Ford advertised impressive fuel economy and payload capacity for its cars and trucks. Unfortunately, these figures were not based in reality, leaving customers with vehicles that did not meet their standards.”  

Determining Factor?

Payload capacity is the maximum weight and space a truck can carry, which is a big deal for individuals or businesses using them to transport materials and goods. It could be the determining factor in buying the vehicle.  

Elon Musk tweeted this days after the Iowa announcement.

Deceptive ads aren’t what one would expect from a company that in March was named among the “ten most ethical companies in the world.” It’s also not what one should reasonably expect from Ford, given its supposedly longstanding code of conduct rules.

Ford in 1977 pledged to “make accurate claims to our customers, use only competent testimonials, and strive to be open about all aspects of the products and services we offer.” The company promised to be “vigilant against conduct which has the intent, capability, or effect of being deceptive towards our customers.” Ford also committed to “not merely abide by the law in a technical way” but to “strive to serve our customers with honest values, avoiding all devices and schemes which prey on human ignorance or gullibility.”

My sense is that when Ford drafted its code of conduct rules decades ago, there really was an institutional desire and commitment to adhere to them. I’m an avid reader of corporate code of conduct statements and most of them these days are written in HR and PRspeak, not the plain-speaking language used to articulate Ford’s values and rules. I’ve noticed there is a disproportionate correlation between the declared piousness of corporate conduct statements and actual adherence to them. American Express and Centene are but two examples.

What’s notable about Ford’s advertising deception is that it was deliberately orchestrated.

From AG Miller’s news release:

In the world of truck advertising, the claim of “Best-in-Class" payload is a coveted title. The attorneys general allege that Ford devised a deceptive methodology to calculate maximum payload capacity based on a hypothetical truck configuration that omitted standard items such as the spare wheel, tire and jack, center flow console (replacing it with a mini console), and radio. The trucks’ hypothetical payload capacity increased by approximately 154 to 194 pounds, just enough for Ford to advertise a misleading Best-in-Class payload. 

Ford used this deceptive strategy only for calculating payload for advertising purposes; it did not use that strategy for calculating actual payload capacity of individual Super Duty pick-up trucks. Although Ford advertised the Best-in-Class payload as available to all consumers, only fleet purchasers (a limited category of businesses that purchase multiple new vehicles each year for commercial purposes) could order trucks equipped so that they could achieve the advertised payload capacity. Individual purchasers could not purchase a Super Duty pickup truck that realized Ford’s Best-in-Class payload claims.  

Think about this for a moment: Some Ford employees, presumably with the knowledge and blessings of top management, concocted measurements that were intended to deceive consumers, contrary to the company’s own ethics rules. And Ford’s deceptions weren’t limited to the 2011-14 period for which it settled with Iowa’s AG.

Automaker's Deceptions

According to the independent trade publication Ford Authority, Ford last year issued a recall for select 2020 Ford Super Duty vehicles equipped with the automaker’s 6.7L Power Stroke diesel due to overstated payload capacity values on the tire and loading information label, overstated accessory reserve capacity values on the safety certification label, and overstated weight values on the truck camper loading documentation. That sparked a class-action suit, which according to AG Miller is still pending.

Ford’s multistate settlement prohibits the company from “making false or misleading advertising claims concerning the estimated fuel economy or payload capacity of a new motor vehicle.” It subjects Ford to penalties under the Iowa Consumer Fraud Act if a court determines that Ford violated the settlement agreement.  I’m possibly mistaken in assuming this, but I’d expect Iowa’s Consumer Fraud Act already prohibits Ford and any other company from making false or misleading claims.

Ford CEO Jim Farley

I wonder if Ford might again be in violation of misleading disclosures. The company’s much ballyhooed Ford Lightning electric trucks have just been released, and trade publications have reported the vehicle loses half its range when towing a 23-foot Airstream trailer. That multiple trade publications consider the revelation news suggests that they weren’t previously aware of the considerable range loss.

A 50-percent loss in range is significant and worthy of prominent upfront disclosure, particularly since CEO Farley admits that the company’s charging network needs “major work.” Airstream trailers are enjoying a surge in popularity, and being able to only go 100 or so miles before recharging Ford’s electric truck in the real world means Ford Lightning owners shouldn’t consider venturing too far from their driveways.

Ford’s Farley is prone to making statements I perceive as insincere, particularly his claim that Ford’s “love of Michigan” influences its decision making.

Love of Michigan?

Under Farley’s watch, Ford has announced plans to invest more than $11 billion in Kentucky and Tennessee, expand its manufacturing operations in Mexico where the popular electric Mustang is assembled, and move more white-collar jobs to India where Ford already has more than 11,000 employees. There have been reports that Ford is mulling building EVs in India for export. Last October, I wrote a column about how Farley played Michigan Governor Gretchen Whiter and other state officials for fools.

Whitmer and Detroit’s fawning media like to tout Ford’s revitalization of the city’s former train station which is being refurbished with almost $500 million in taxpayer funds. Notably, Ford doesn’t want its name on the structure, supposedly to keep the edifice corporate “agnostic.” My skeptical view is the facility will become yet another taxpayer boondoggle, and Ford doesn’t want its logo prominently appearing on a failed project that will remind Detroiters of the company’s abandonment of the city.

Perhaps Farley is deserving of all his media hype and praise, but history shows that when the media universally goes gaga over a CEO and writes over-the-top puff pieces declaring they walk on water, they rarely live up to their billing.

Unfortunately for Michigan, if Farley fails, so might Ford. He’s made a bet the farm wager on electric vehicles, and if Ford’s Lightning trucks don’t sell or perform as expected, things could spiral out of control very quickly.

Regardless, Farley will still walk away with tens of millions of dollars and the Gannett-owned Detroit Free Press will likely continue worshiping the ground he walks on.

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