Ford talk­ing to EPA about fuel econ­omy

Con­sumer Re­ports says hy­brids don’t hit their tar­get mpg. Washington re­mains wild card in re­cov­ery ef­forts.

Austin American-Statesman - - BUSINESS - Ford’s C-max didn’t meet pub­lished fuel econ­omy of 47 mpg, av­er­ag­ing 38 mpg, Con­sumer Re­ports says. Ford / mct

DETROIT — Ford said Fri­day that it’s talk­ing to the government about the fuel econ­omy of its hy­brid cars af­ter a report sug­gested they’re fall­ing short of tar­gets.

Con­sumer Re­ports said last week that Ford’s new C-Max hy­brid didn’t meet the pub­lished fuel econ­omy of 47 miles per gal­lon, av­er­ag­ing 38 miles per in the mag­a­zine’s test­ing. Other hy­brids — in­clud­ing the Ford Fu­sion and Toy­ota Prius V — have also fallen short in the mag­a­zine’s tests.

Ford said it fol­lowed the En­vi­ron­men­tal Pro­tec­tion Agency’s guide­lines when it set its fuel econ­omy stan­dards. But the EPA’s hy­brid tests don’t ex­actly mimic re­al­world driv­ing.

For ex­am­ple, Con­sumer Re­ports said it mea­sures high­way fuel use for a car go­ing 65 mph, but the EPA’s high­way test speed av­er­ages 48 mph.

Ford’s global ve­hi­cle devel­op­ment chief Raj Nair said the way own­ers drive their hy­brids can also af­fect per­for­mance. For ex­am­ple, driv­ing a hy­brid car 75 mph, in­stead of 65 mph, can cost the driver seven mpg, Nair said.

Hot or cold tem­per­a­tures can also af­fect the num­bers.

Nair said Ford is talk­ing to the EPA to see if the agency needs to change the way it tests hy­brids. The EPA said Fri­day that it is re­view­ing Con­sumer Re­ports’ re­sults.

Fuel econ­omy dom­i­nated the con­ver­sa­tion Fri­day as Ford in­tro­duced two new com­mer­cial ve­hi­cles that will go on sale late next year.

The Tran­sit, which will even­tu­ally re­place Ford’s E-Se­ries vans, will haul 300 pounds more than the cur­rent E-Se­ries and has twice the vol­ume. Ford will of­fer three en­gine choices and three roof heights.

The com­pany also un­veiled a smaller Tran­sit Con­nect com­mer­cial ve­hi­cle, which is get­ting its first big makeover since it went on sale in Europe a decade ago.

The new Tran­sit Con­nect can tow up to 2,000 pounds for the first time. It comes in short and long ver­sions. Ford will also of­fer an op­tional Eco­Boost en­gine in the Tran­sit Con­nect that is ex­pected to get more than 30 mpg.

Ford didn’t re­lease prices or fi­nal fuel econ­omy num­bers for the vans. NEW yORK — On the road and in fi­nan­cial mar­kets, it pays to ask some­body with a good sense of di­rec­tion.

Two years ago, most of Wall Street’s econ­o­mists be­lieved in­ter­est rates had bot­tomed out. But not Priya Misra, a top in­vest­ment strate­gist at Bank of Amer­ica Mer­rill Lynch.

She was one of few to ar­gue that the sput­ter­ing U.S. econ­omy and the Euro­pean debt cri­sis would knock long-term in­ter­est rates to record lows in 2011.

“I was called quite crazy at that point,” she says.

Her forecast looks clear-sighted to­day: The rate on the 10-year Trea­sury note, an all-im­por­tant an­chor for mort­gage rates and other loans, seems stuck un­der a his­tor­i­cally low 2 per­cent.

So what does Misra think now?

Long-term in­ter­est rates will creep higher, she says, as the econ­omy grad­u­ally gains strength. The wild card is Washington, where talks are un­der way to avert tax in­creases and government spend­ing cuts sched­uled to start in Jan­uary.

Most on Wall Street are con­fi­dent that con­gres­sional Repub­li­cans and the White House will stave off the full “fis­cal cliff” be­cause the stakes are so high.

Econ­o­mists say the tax hikes and spend­ing cuts could trig­ger a re­ces­sion early next year.

“Our as­sump­tion is that a deal will get done,” Misra says. If the two sides fail to strike a bargain, “politi­cians know that the mar­kets will take it very badly and blame Washington for it.”

Con­fi­dence in a deal may be shaken, push­ing Trea­sury yields lower, if the talks drag on too long. Ethan Har­ris, Bank of Amer­ica’s chief U.S. econ­o­mist, says it looks in­creas­ingly likely that bud­get ne­go­ti­a­tions will run into the new year.

If that hap­pens, it may take the fi­nan­cial mar­kets to force Congress to com­pro­mise.

“Congress and the pres­i­dent have given them­selves way too much to do in way too lit­tle time,” Har­ris says. “Some­thing has to slap Washington in the face, and it’ll be the stock mar­ket.”

Why not the bond mar­ket? A fight over a government’s bud­gets and debt might be ex­pected to send in­vestors flee­ing from its bonds, caus­ing prices to fall and yields, which re­flect the government’s bor­row­ing rate, to climb.

Bat­tles over bud­gets in Spain and Italy, for in­stance, reg­u­larly cause those coun­tries’ bor­row­ing rates to jump. In the United States, traders say a brawl in Washington would have the op­po­site ef­fect.

That’s be­cause rates are also a barom­e­ter of worry. When the world econ­omy ap­pears in dan­ger, banks and big in­vestors hide money in Trea­surys, ig­nor­ing mount­ing U.S. government debt be­cause they see this coun­try, the world’s largest econ­omy, as a trust­wor­thy bor­rower.

To­day, the econ­omy is health­ier than it was two years ago, when Misra made her pre­scient pre­dic­tion about record-low in­ter­est rates.

But a hard enough blow could still send it into a re­ces­sion. The big­gest dif­fer­ence now is that Misra and the rest of the Bank of Amer­ica strate­gists think the big­gest threat comes from Washington, not Europe.

It’s a widely shared view across Wall Street. As they lay out pre­dic­tions for next year, bankers and money man­agers paint a mostly sunny pic­ture.

Richard drew / as­so­ci­ated PRESS

Trader Neil Cata­nia (left) works on the floor of the New York Stock Ex­change on Fri­day. An­a­lysts say Wall Street is con­fi­dent the pres­i­dent and con­gres­sional ne­go­tia­tors will reach a deficit-re­duc­tion deal. If they don’t, a lead­ing an­a­lyst said, ‘the mar­kets will take it very badly and blame Washington for it.’

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