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UPDATE 1-Ford to update software on hybrids to boost mileage

* Updates will limit variability in fuel economy performance on hybrids

* Changes will affect C-Max, Fusion and Lincoln MKZ hybrids

By Deepa Seetharaman

DEARBORN, Michigan, July 16 (Reuters) - Ford Motor Co will offer free software updates on its hybrid models to boost their real-world fuel economy and better align with the gas mileage advertised on the window sticker, a company executive said on Tuesday.

Among the improvements, Ford plans to increase the maximum all-electric speed on those vehicles from 62 miles per hour to 85 mph (99 km per hour to 137 kph). This will boost fuel efficiency by allowing the car to rely on the lithium-ion battery for a longer period of time.

The move affects the Ford C-Max and Fusion as well as the Lincoln MKZ hybrids. The changes are designed to narrow the wide range of fuel economy performance reported by hybrid drivers, said Raj Nair, head of Ford's global product development.

"These enhancements will improve fuel economy satisfaction in several different driving conditions and modes of operation, like highway driving, short trips and use of climate control," Nair said during a media briefing.

Owners of about 77,000 hybrid vehicles in the United States and Canada will be offered the upgrades free of charge. Nair declined to provide a cost estimate for the updates.

The move comes as Ford faces a number of class action lawsuits that claim the No. 2 U.S. automaker overstated the gas mileage on its hybrids. Consumer Reports magazine said last year that the Ford C-Max and Fusion hybrids fell far short of their promised fuel economy in road tests.

Ford has said that aggressive driving, hot and cold weather and battery performance have an outsized effect on a hybrid's gas mileage. Hybrids show a wider range of results when compared to gas-powered vehicles, Nair told reporters.

The company said last year that it was studying if U.S. fuel economy tests for hybrids needed to be changed to reflect their sensitivity. Nair said Tuesday that Ford's discussions with the U.S. Environmental Protection Agency continue, but "there's no proposal forthcoming."

"All manufacturers are seeing increased variability with hybrids from what you would normally see on gas engine vehicles," he said. "So we're open to that dialogue with the EPA on any revisions they may propose on hybrid vehicle testing."

The EPA estimates that the Lincoln MKZ hybrid gets about 45 miles per gallon on city roads and the highway combined. Both the Fusion and C-Max are expected to get around 47 miles per gallon.

As part of the fixes announced Tuesday, Ford will improve the active grille shutters on those hybrids so they can reduce aerodynamic drag under a wider range of temperatures.

Ford is also reducing the electric fan speed, shortening the engine warm-up time and minimizing the use of the air conditioning compressor to save energy.