A hybrid powertrain has a transmission including a motor and a sensor for sensing rotation of the transmission output member. Motor speed signals are available from the motor controller. Speed signals representative of output speed are calculated from both the speed sensor and the motor speed in conjunction with known speed relationships between the motor and the output. A variety of in-range and dropped signal diagnostics is performed for the sensors and are used in the development of a set of software switches for selecting which of the speed sources is used as the output speed.