Ford Launches Hybrid Initiative
Thursday, September 22, 2005
Ford Motor Co. jumped on the hybrid-car bandwagon yesterday with a promise to boost production tenfold to 250,000 cars and trucks per year by 2010, a decision that moves hybrids closer to the mainstream of the U.S. auto market.
Speaking in Dearborn, Mich., William Clay Ford Jr., the company's chairman and chief executive, said the automaker was acting without prodding from policymakers in Washington. Ford said he made the decision out of concern for the environment and out of a desire to counter "a multi-dimensional energy crisis that afflicts this nation." He said that even though the decision posed a challenge because Ford's vehicles are big and heavy and use a lot of fuel, the automaker had to "get on with it."
Only a tiny percentage of the vehicles on U.S. roads are hybrids. At Ford, hybrids will represent about 4 percent of the company's global sales of close to 7 million vehicles. But Ford's hybrid decision could deliver a windfall of "green PR," similar to what Toyota Motor Corp. has gained for early introduction of its Prius hybrid. Ford's decision also leaves exposed executives at rival General Motors Corp. who have outlined a much more cautious hybrid strategy.
Ford sells only one hybrid vehicle -- a gas-electric version of the Escape, a small sport-utility vehicle. Ford has plans to sell 24,000 Escape hybrids this year. With the new commitment, Ford would offer the option of a gas-electric engine on more than half of its Ford, Lincoln and Mercury models. Annual sales of 250,000 hybrids would surpass the 2004 volume of brands such as Volkswagen, Cadillac and Volvo in the United States.
The announcement comes as gasoline prices have risen steadily, causing consumers to turn away from vehicles with poor fuel economy, particularly gas-guzzling SUVs made in Detroit. Both Ford, the No. 2 U.S. automaker, and GM, the largest, have reported substantial slides in profits in their North American operations this year. Bonds from the two were downgraded to junk status by Wall Street bond-rating agencies, in part because of the companies' reliance on declining SUV profits.
All of the auto companies are pressing hard to catch up with Toyota, the industry leader in hybrid technology. Toyota plans to sell 140,000 gas-electric hybrids in the United States this year. Its popular Prius is on track for sales of 100,000 vehicles. Toyota also has a Highlander hybrid and the RX 400h from Lexus. Additionally, Toyota has said it is looking to bring down hybrid costs. Because of added costs associated with development and production, gas-electric hybrids typically cost $2,000 to $4,000 more than similar gas-powered vehicles.
Carmakers are looking for all sorts of ways to cope with rising gas prices. Mitsubishi Motors Corp. unveiled a program to give U.S. buyers of its cars and SUVs a year's worth of free gasoline. The offer applies to 2005 model-year vehicles. The program begins Friday and runs through Oct. 31. Mitsubishi said buyers will be mailed prepaid debit cards totaling $1,500 to $2,500, depending on which vehicle they buy.
In Washington this week, GM had its public relations machinery in overdrive in an attempt to improve the automaker's laggard image on energy and environmental issues. GM executives from Detroit, including G. Richard Wagoner Jr., the chairman and chief executive, showed off plans to selected journalists and congressional leaders for future vehicles that the company said will get better gas mileage than its current models. A GM spokesman said the company will build 12 hybrid models by the end of the decade. The first will be a hybrid version of the Saturn Vue, a small SUV, followed by larger SUV hybrids starting in 2007, he said. GM will also bring out some large car-based SUV models that get better gas mileage than traditional truck-based models.
Sensing a shift in consumer buying habits in the United States, the world's largest auto market, nearly all auto companies with sales in the country have been seeking a hybrid vehicle strategy. Earlier this month, at the Frankfurt auto show, Volkswagen AG and Porsche AG announced a joint venture to build a hybrid SUV for the U.S. market. BMW Group this month also said it agreed to join an ongoing effort by GM and DaimlerChrysler AG to develop hybrid technology. Ford said it will also offer vehicles that can run on a blend of gasoline and ethanol. Ethanol, a fuel derived from corn and other agricultural products, is cleaner and cheaper than gasoline.
Ford's announcement on hybrids drew praise from environmental groups, which have advocated greater use of hybrid technology and pressed William Ford in particular to back up his stated concern for the environment with action.
"Ford has always been willing to listen. But the reality is that their products have continued to lag behind much of the industry in environmental performance," said Jason Mark, vehicles director of the Union of Concerned Scientists, an environmental advocacy group based in Cambridge, Mass. "Ford and GM are in junk-bond status. It would be insane to keep offering the same products."