ACCC sues Ford over PowerShift

UPDATE 26/07/2017 3:30pm: Ford Australia President and CEO Graeme Whickman has clarified the process in which his company has dealt with customers in relation to problematic PowerShift transmissions in three of its small cars. The full transcript of his address to media in Melbourne this afternoon is below.

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Ford Australia has refuted allegations by the Australian Competition and Consumer Commission (ACCC) that it misled customers of certain 2010-2016 built Focus, EcoSport and Fiesta models fitted with a PowerShift transmission and says it will challenge the consumer watchdog in court.

The ACCC has today instituted legal proceedings against Ford Motor Company of Australia Limited, alleging that it “engaged in unconscionable and misleading or deceptive conduct, and made false or misleading representations in its response to customer complaints”.

Drawing parallels with Volkswagen’s DSG issues, Ford customers have complained about the Getrag-sourced dual-clutch transmission in Focus, Fiesta and EcoSport models for more than five years and in June 2016 commenced legal proceedings demanding remedies for faulty transmissions.

Now the ACCC has alleged that about half of the 70,000 vehicles affected had at least one repair relating to their PowerShift transmission, which customers say produces excessive shuddering and jerking when accelerating, loss of gear selection and sudden loss of power and/or excessive noisiness.

According to the ACCC, from 2011 to May 2015 Ford refused to provide a refund or replacement vehicle to consumers, even after vehicles had undergone multiple repairs that had not fixed the issue.

The ACCC claims that in most cases Ford refused to provide a refund or a replacement vehicle unless customers participated in its ‘PowerShift Ownership Loyalty Program’ by making a substantial payment for a replacement vehicle, which was on average $7000.

“The ACCC alleges that Ford misrepresented to customers who made complaints that the issues with their vehicles were caused by the way the driver handled the vehicle, even though Ford was aware of systemic issues with the vehicles from at least 2013,” said ACCC Chairman Rod Sims.

“The ACCC alleges that Ford’s conduct towards customers who had complained of issues with their vehicles was unconscionable.”

Australia’s consumer watchdog also alleges that Ford then on-sold vehicles surrendered as part of the PowerShift Ownership Loyalty Program to wholesalers and customers, without disclosing the systemic or specific issues experienced with those vehicles.

For its part, Ford says it rejects and will strongly refute the allegations made by the ACCC in its civil proceedings.

It says it provides refunds and replacements in accordance with the Australian Consumer Law, and that it has an extensive customer care program including repairing vehicles, compensating customers and, depending on the circumstances, providing full refunds and providing replacement vehicles.

Ford claims it has upgraded the PowerShift transmission in more than 12,000 vehicles and that after “proactively reaching out to the most affected customers” their vehicles were fitted with the latest specification clutch free of charge.

It stresses that the current LZ Focus and vehicles equipped with manual transmissions or diesel engines are not affected, and continues to encourage any customers with concerns about their Ford vehicle to call their dealer or Ford Australia directly on 13FORD.

“We acknowledge that some customers had a poor experience when the clutch shudder issues on the PowerShift transmission first came to light and we are sorry for this,” said Ford Australia President and CEO Graeme Whickman, who will front media at 1:00pm in Melbourne today.

“We’ve continued to improve our response times to customers and have been repairing vehicles, compensating customers, and depending on the circumstances, providing full refunds and providing replacement vehicles.

“Repairs are available for all PowerShift transmission issues and all new vehicles on sale today are built with the latest updates.

“Whilst we strongly refute the ACCC allegations and will challenge them, we will work with them wherever needed to help provide certainty about the application of Australian Consumer Law for our industry.

“Our focus right now is on continuing to get the latest specification clutch to our customers so they can enjoy their vehicles as intended.”

Sims said the Ford case was an example of the “alarming” level of non-compliance in the nation’s new-vehicle industry, which he promised would be laid bare by the release of the ACCC’s study into the new vehicle retailing market next month.

He indicated the study could lead to further ACCC declarations, injunctions, pecuniary penalties, consumer redress orders, corrective advertising and compliance program obligations.

“The ACCC is alarmed about the level of non-compliance with the Australian Consumer Law in the new car industry, which has been laid bare in our new car retailing market study due out next month,” said Sims.

“Cars are the second-most expensive purchase most consumers will ever make and if they fail to meet a consumer guarantee, people are automatically entitled to a remedy.

“The ACCC urges all vehicle manufacturers to ensure their complaints handling processes provide the remedies that consumers are entitled to get under the Australian Consumer Law or, like Ford, they will find themselves in court.”

GRAEME WHICKMAN: Right. Thank you all for coming. I'll be making a short statement addressing the ACCC's action today and I'll be happy to take questions afterward.
First, let me say Ford Australia strongly refutes the allegations made by the ACCC today and we will be challenging those vigorously in court. We acknowledge that some customers may have had a poor experience when the PowerShift transmission issues first came to light. We're sorry for that, but we've been working hard to fix that. Even though our initial response didn't keep pace with the unexpected surge of complaints, at no point did we seek to deny customers their rights under Australian consumer law.
Now, we've continued to improve our customer response times. We've been repairing vehicles, we've been compensating customers, and, depending on the circumstances, we've been giving refunds and complete replacement vehicles. Now, repairs are available on PowerShift transmission issues, and all new vehicles on sale today have the latest updates.
Now, it's important to note that this is not a safety issue. Now, the Department of Infrastructure and Regional Development – DIRD, they're the regulator responsible for safety issues in the automotive space in Australia – have investigated this issue and have no safety concerns.
Now, while we strongly refute the allegations made by the ACCC and we will challenge them, we actually will continue to work with them to provide certainty about the application of consumer law and its application in the automotive industry.
Finally, if any customer has any concerns about their PowerShift transmission, we'd ask them to either contact their local dealer, or contact Ford directly at 13F-O-R-D – 13FORD.
So with that, I'm now happy to take any questions.

QUESTION: The consumer watchdog alleges that Ford refused a refund, and in the case of them getting replacement vehicles customers had to pay on average about $7000. Firstly, were customers ever required to pay anything for a replacement vehicle if they had a problem?

GRAEME WHICKMAN: So the allegations are factually incorrect. We have a distinct refund and replacement policy designed to ensure that we meet the obligations, Australian consumer law, for customers – period. Secondly, though, as technical issues arose and they were fixed over a period of time – diagnosed, solutions, and then fixed – we may have had customers who were still unhappy with the car, regardless of whether the car was successfully repaired or not. In those cases, we chose to put in place a separate program, in addition to refund and replacement programs, which we call the Owner Loyalty Program, and it allowed a customer to get a discounted vehicle from any part of our range in an attempt to keep them within the brand and the showroom.

QUESTION: Although, if a customer has the problem fixed and they're still not happy, do they have the right to have a completely new car?

GRAEME WHICKMAN: So the Owner Loyalty Program was designed for a customer satisfaction outcome. The technical issues that arose – which were diagnosed, solutions found, and then solutions rolled out – answered any technical concerns that they would've had with the vehicle at any given time, and those fixes were put in place. Now, I've acknowledged that early on I think some customers may have had a poor experience as we learned about some of those issues, but like any technical product, you see what's being presented and then every case is assessed on a case-by-case basis to ensure that we meet a very high standard, both in terms of the legal obligation and also customer obligation, and in those cases we completely fixed the vehicle. In cases where the vehicle was still fixed and successfully operating but a customer still was unhappy because of their experience, or they had lost faith in the vehicle, we chose to put a loyalty program in place for a customer satisfaction measure to ensure that we met a different hurdle, beyond the legal hurdle, to keep customers happy.

QUESTION: If they're still not happy, though, shouldn't they just get a whole new car? If there's been multiple issues, even if you say it's fixed, why shouldn't they just get a whole new car?

GRAEME WHICKMAN: So, as technical issues arise we look for those solutions, and each of those solutions have fixed successfully those cars. Those cars operate to a technical specification that we expect of a vehicle in Australia and they are successfully repaired to that level.

QUESTION: Based on what you're saying, how many customers have been fully refunded or had their car replaced after [indistinct]?

GRAEME WHICKMAN: So, as you've seen reported in the ACCC's press release this morning, there are about 72,000 customers who are driving around in a Fiesta or a Focus or an EcoSport between 2010 and 2016. As it stands today, we've had an interaction, so a service interaction, with about half of those customers. And that interaction – so that repair, as it's quoted in the release – actually could range from a software update, through to cleaning of the clutch, all the way through to replacement of the clutch. I'm not at liberty right now to talk about the specific number or volume that people had refunds and replacements, I don't have that number to hand, but what I can assure you is we have a distinct program that answers a question of a customer when they ask can I have a refund, or can I have a replacement vehicle? And that program runs and continues to run not just with DPS vehicles, the PowerShift, but any other vehicle that we offer in the market.

QUESTION: So have you kept that data to hand? That seems like a pretty basic thing that you might go and find out, given the ACCC's actions. Why don't you know that figure?

GRAEME WHICKMAN: That number changes from day to day. I mean, we have interactions and we have customers coming to us on a regular basis across all our vehicle lines, and every time we have that, every time a customer presents, we assess that situation on a case-by-case basis.

QUESTION: Some customers, according to the ACCC, reported sudden loss of power. At any time a customer's put at risk on the road with a sudden loss of power, I mean, I imagine that's something that's quite concerning if you're in heavy traffic.

GRAEME WHICKMAN: You'd understand that safety is of utmost importance to us, as it is to our customers, and we take any safety situation very seriously. We have our own internal view, but more importantly, as I mentioned earlier, the Department of Industry and Regional Development – that's the safety regulator in this market – have investigated the vehicle, the transmission, and concluded there are not safety concerns.

QUESTION: Would there ever be safety issues, or would customers' lives ever be put at risk because of the gearbox and the way it was when it first rolled out?

GRAEME WHICKMAN: So, through that investigation, completed by DIRD, there has been no safety concerns identified. And it's the same, I have a mother – a 68-year-old mother – who drives a Fiesta 2011 and when she asked me the same question I assured her she was safe to drive that vehicle.

QUESTION: Given that half of all customers who have purchased these cars have complained at some point, do you admit there's a systematic failure of [indistinct]?

GRAEME WHICKMAN: Firstly, half of the customers haven't complained. So we have half of our customers who have had a repair, and that repair, as I said, could range from a software upgrade all the way through to a clutch replacement. And when the customers come in, we look to actually do a good job of customer satisfaction. I've mentioned that early on, when we saw quite a surge of customers coming through in 2015, we probably weren't as resourced as we needed to be; but since then, we've increased our resource by ten-fold. We've actually had a dedicated PowerShift call centre team whose sole responsibility is to look after customers when they come in.
In addition to that, we extended warranties to all affected customers – so that's across all those units – by upwards of five to seven years, and then more recently, we've actually proactively gone out and contacted any customer whose had two-plus instances of clutch replacement and said to them we'd like to replace your clutch with new clutch material, regardless of whether they're unhappy or not happy, just a carte blanche proactive program to get out there. And we've now gone to circa 5000 customers and replaced upwards of 12,000 clutches.

QUESTION: Graeme, the ACCC alleges that some of the surrendered vehicles were on-sold. Were they functioning vehicles, and were customers notified that that car had the clutch replaced?

GRAEME WHICKMAN: So, when we take back a vehicle – a replacement vehicle, a refunded vehicle – that vehicle is assessed by our technical teams, both here and in dealerships, and that vehicle is brought back to specifications with the same fixes that I've already mentioned are available to all vehicles as it stands at the moment. We don't on-sell vehicles without ensuring that any outstanding warranty or technical vehicle requirements are not completed.

QUESTION: As the ACCC alleges, were drivers ever to blame? Was it their driving that caused the issue?

GRAEME WHICKMAN: Look, the transmission actually learns and adapts to a driver. So there's some truth to the fact that there is a learning and adaptability piece as it pertains to the driver, but it was never our intent to suggest that the customer was at fault.

QUESTION: Graeme, why weren't these vehicles not withdrawn from sale until the problem was resolved?

GRAEME WHICKMAN: So as technical issues arose, we looked to diagnose and fix. As I've mentioned, not all vehicles have been affected. We've already talked about just about half have had some sort of repair. So as we present with vehicles, we look to fix, diagnose, and then get the vehicle back to the customer.

QUESTION: Graeme, have some customers already been compensated for their vehicles? They haven't been compensated fully for their vehicle the full price [indistinct].

GRAEME WHICKMAN: So when we go to case-by-case situations, we assess how that vehicle is presented and we assess the customer's situation, and if we believe they're entitled under the Australian consumer law for a refund or replacement, then we do so.

QUESTION: Is there any further compensation being considered for customers, in the sense that if something goes wrong with your car it's an inconvenience, you have to go in and get it replaced, if it happens multiple times you have to keep going in, the car may be difficult to sell later on because someone else may not want to buy it because they're worried about the transmission issues. Has Ford considered any further compensation for customers for the inconvenience of the fact their car's potentially worthless when they go to sell it later on?

GRAEME WHICKMAN: So first and foremost, we bring the car back to specification – we fix the issue. So the issue completely fixed and that vehicle is fit-for-purpose. In terms of the inconvenience, we are one of the few manufacturers in Australia that actually offers a free service loan program. So when people come in for scheduled service and the like, they actually get a free loan vehicle. We try to make our customers' lives as easy as possible in general and we're trying to actually lead a customer service revolution with things like that. So I think we do a good job of making sure that customers aren't inconvenienced.

QUESTION: How much do you think it has damaged Ford's brand?

GRAEME WHICKMAN: Look, I'm here today to represent the 2700 or so Australian employees, and at the end of the day those are employees and consumers in the market, and we have a pretty proud legacy of what we actually do in this market, and so we want to remind people of that. At the same time, we need to be honest. We're not here hiding behind a press statement; we're here to front up and talk you, the press and our customers, to assure them that yes, they're in a safe vehicle and yes, we have fixes for any of the issues they're facing, and absolutely refute that we've acted in an unconscionable manner.

QUESTION: And can you guarantee that if, for instance, someone was about to go out of warranty, that if there are future issues with that PowerShift gearbox that they'll get that done free of charge? What are your qualifications for that?

GRAEME WHICKMAN: Look, we've already extended the warranty, that's the first port of call. We did that and we went out to affected customers – all 72,000 of them – last year and said, look, here's another two years warranty to make sure that you've got peace of mind; if you have any issues, you pick up that phone, you go to the dealership and you will have a no-cost option. By the way, a warranty passes with the vehicle, not with the customer. So if you're the second, third, or fifth owner of that vehicle, you're still going to be covered by the extended warranty.

QUESTION: [Inaudible question].

GRAEME WHICKMAN: We believe it is, and given the fact that we've already replaced upwards of 12,000 clutches with new clutch material, we are, when we encountered the problem, fixing it and moving on.

QUESTION: The car wasn't produced in Australia, so obviously you guys haven't manufactured it here. Are you having to cover costs or is it Ford global that's fixing and [indistinct]?

GRAEME WHICKMAN: Look, the cost is irrelevant. I mean, at the end of the day, firstly I'm here to refute what the allegations were made today; and secondly, I'm here to make sure customers understand this is not a safety issue; and then thirdly, I want to make sure customers understand finally that if they have an issue, they go to the dealership or they contact us because we have fixes for the vehicle.
Thank you.