Ford Abandons Pledge On Hybrid Production
Friday, June 30, 2006
Ford Motor Co. has dropped a pledge to build 250,000 gas-electric hybrid cars per year by the end of the decade, saying it will expand into other fuel-saving technologies.
Environmentalists accused the automaker of backpedaling, but industry analysts said the move underscored the difficulty the industry is having in selling the technology to mainstream car buyers.
Ford Chairman William C. Ford Jr. outlined the decision in a letter to employees Wednesday. The company made the letter public yesterday after details were reported in the Detroit News. In the letter, Ford said the 250,000 goal was "too narrow" to achieve substantial improvements in vehicle fuel economy or curb carbon dioxide emissions. He said that the company shouldn't wed itself to a single technology and that Ford will consider other options, including diesel, biodiesel and ethanol fuel blend E85, as well as seek advances in engine and transmission technology.
Building a lot more hybrids and other fuel-efficient vehicles has been touted as a major component of the No. 2 U.S. automaker's "Way Forward" turnaround plan. Like General Motors Corp., Ford's North American business strategy has unraveled in the past year as consumers have turned away from their highest-profit vehicles: large cars and sport-utility vehicles.
William Ford made the original hybrid pledge last fall in a speech to employees at the company's Dearborn, Mich., headquarters. In the speech, Ford said the automaker was acting out of concern for the environment and was working to combat a "multidimensional" energy crisis afflicting the nation. Ford said that he knew the goal was going to be tough to meet but that it was time to "get on with it."
Ford and other Detroit automakers are now touting another technology to counter national anxiety over high gas prices, foreign dependence on oil and global warming: ethanol, a fuel made from corn or, potentially, other agricultural products. In a joint letter sent Wednesday to members of Congress, General Motors, Ford and DaimlerChrsyler AG announced a new promise to double annual production of vehicles that run on alternative fuels, to 2 million per year.
Yesterday, the House rejected an attempt led by Republican lawmakers to offer legislation to increase the government's fuel-economy standards for new cars and trucks. Automakers have resisted those increases and often pointed to their own voluntary efforts to reduce oil consumption and curtail greenhouse gas emissions.
Daniel Becker, the director of the Sierra Club's global-warming program, said, "It's becoming clear that Bill Ford himself is unable or unwilling to live up to his own commitments on the environment." He complained that in 2003, Ford reneged on a promise to improve the fuel economy of sport-utility vehicles by 25 percent over three years.
Becker called Detroit's growing emphasis on ethanol a scam, saying automakers are building flex-fuel vehicles to qualify for government credits that would allow them to build even more gas-guzzling vehicles. He said government reports show that fewer than 1 percent of ethanol-capable vehicles ever run on the fuel. There are 170,000 gas stations in the United States but only about 700 with E85 pumps, according to the auto companies.
Ford officials tried to allay concerns with a conference call between environmentalists and high-level company officials yesterday. The environmentalists pushed Ford to take a stronger stance on public policy solutions for oil dependence and global warming, including pushing the federal government to adopt higher vehicle fuel-economy standards or endorse a national policy to cap greenhouse gases.
Industry analysts say the hybrid market is proving to be more difficult to crack than automakers initially expected. Anthony Pratt, a powertrain analyst at J.D. Power Automotive Forecasting, said he wasn't surprised that Ford dropped its commitment.
"We never really forecast they would do 250,000," he said.
Pratt said that the Toyota Prius is selling well but that most other hybrids in the market are barely meeting expectations, including Ford's Escape and Mercury Mariner hybrid SUVs. He said that Honda's Accord hybrid is struggling in the market and that Toyota has had to add financing incentives to lift sales of the hybrid version of the Highlander. Costs are still too high compared with traditional vehicles, Pratt said.
"Consumers are willing to accept hybrid technology, but they are not willing to accept a price premium that can't be paid off over time by consuming less fuel," Pratt said. "They want to see an economic break-even point."
Hybrid vehicles made up 1.2 percent of the overall U.S. new-vehicle market in 2005 and are projected to reach 5 percent by 2013. "While it's significant growth, it's still a relatively small percentage of the market," he said.