US: Ford Plans Shift in Focus Away From Hybrids
Detroit auto companies, which have lagged far behind their Japanese rivals in developing and selling hybrid vehicles, are taking a new direction in a bid to emerge as leaders in their own right on environmental issues.
The latest sign of this shift occurred Thursday, when the Ford Motor Company confirmed that it would not meet its widely publicized goal of selling 250,000 hybrid vehicles a year by 2010, a goal set last fall when energy prices spiked after Hurricane Katrina.
Instead, Ford plans to focus its attention on flexible-fuel vehicles, which can run on gasoline and another type of fuel such as ethanol, William Clay Ford Jr., its chief executive, told employees in a memo distributed Wednesday.
Ford was the first Detroit company to sell hybrid models and it will continue to develop them, Mr. Ford said in an interview here. But that will be part of a broader program to produce cleaner, more efficient vehicles, he said.
"This is in no way a lack of commitment to hybrids," Mr. Ford said. "It's an expansion of our commitment to other technologies."
Mr. Ford, known for his lifelong interest in environmental causes, acknowledged that he would be criticized for the move. But, he said, "The goal all along is a sustainability goal. It is not a hybrid goal."
Environmental groups, as expected, were quick to criticize the company. The Sierra Club said it was "appalled" that Ford was pulling back on its commitment to hybrids in favor of flexible-fuel vehicles.
Daniel F. Becker, director of the group's global warming program, said that because Ford had already backed off a previous promise to build more fuel-efficient sport utility vehicles, the company was "rapidly becoming the automaker that cried wolf."
In 2000, Mr. Ford pledged that the company would achieve a 25 percent increase in the fuel economy of its S.U.V.'s by 2005. But it stepped away from its pledge two years before the deadline. Mr. Ford later said in an company report that it was unable to develop fuel-saving technology as quickly as it had hoped.
Ford is not going down the flexible-fuel path alone. On Wednesday, chief executives of the Detroit auto companies sent a letter to Congress, pledging to double their production of flexible-fuel vehicles to two million a year by 2010. The two largest Japanese carmakers, Toyota Motor and Honda Motor, do not sell flexible-fuel vehicles in the United States.
In recent months, General Motors and the Chrysler Group have each increased their emphasis on flexible-fuel models, even though they have been developing hybrids.
G.M., in particular, has been aggressively marketing the fact that some of its models, like the Chevrolet Impala and Monte Carlo midsize cars, are able to run on E85, a mixture of ethanol, which is grain alcohol derived from corn, and gasoline.
Earlier this year, it introduced a splashy marketing campaign, "Live Green. Go Yellow," that promotes G.M. vehicles that can run on the corn-based fuel.
Meanwhile, Chrysler dealers, who already sell flexible-fuel minivans, are asking for more models that can run on ethanol, the Chrysler chief executive, Thomas W. LaSorda, said last week. He said the company's new Sebring sedan would be available in a flexible-fuel version.
Auto companies began making flexible-fuel vehicles in 1988, after Congress passed legislation giving them credits toward meeting corporate average fuel economy standards for each vehicle they sold.
Mr. Becker of the Sierra Club said Thursday that Ford's shift was motivated by a bid for more credits. But Mr. Ford noted there were tax credits for buyers of hybrid vehicles as well. "It's not a credit-driven thing," he said. "We get credit either way."
More than five million flexible-fuel vehicles now are on American roads, according to the Web site Edmunds.com, even though many consumers may not be aware that their automobiles can run on something other than gasoline.
The renewed flexible fuel emphasis makes business sense at a time when G.M. and Ford are losing hundreds of millions of dollars on their automotive operations in North America, analysts said.
Flexible-fuel technology is essentially paid for, while it would take years and extensive investments in hybrids for American automakers to catch up to Toyota and Honda. "It's a pretty inexpensive and easy way to make your product line more green - not nearly as expensive as doing the hybrid thing," said John Paul MacDuffie, a management professor at the Wharton School at the University of Pennsylvania.
Toyota has sold more than 600,000 hybrids worldwide since 2000. Honda has sold about 150,000 hybrids worldwide in that same period.
Ford has sold about 30,000 Escape hybrids since they went on sale in 2004. Hybrids make up less than 1 percent of Ford's sales, compared to about 5 percent of Honda's sales and 6 percent of Toyota's sales in the United States.
This focus on ethanol does offer bragging rights for Detroit auto companies, since Japanese companies have not sold flexible-fuel vehicles in the United States, with the exception of the Nissan Titan pickup. That may soon change. Toyota plans to sell a flexible-fuel vehicle in Brazil, where ethanol is widely used, during the coming year. Its engineers are looking at all sorts of new technologies.
"It's a horse race," said Jo Cooper, a Toyota group vice president for government and industry affairs. "Everyone in the auto industry wants to have a light-bulb idea."
Ms. Cooper said Toyota would maintain its emphasis on hybrid vehicles, which appeal to customers for a variety of reasons. "Fuel economy is one," she said, "But people love them for the technology. People love them because they're different. They love them because they feel like they're making a contribution" to helping the environment.
Neither hybrid nor flexible-fuel technology is expected to be the ultimate answer to America's dependence on foreign oil, since both rely in part on gasoline, analysts said.
And both have drawbacks: hybrids generally cost more than cars with conventional gasoline engines, while only 600 of the nation's 180,000 service stations sell E85, and those are primarily in the Midwest.
The scarcity of E85 fuel is an important reason why Detroit's automakers should not expect a significant lift in sales by emphasizing flexible-fuel vehicles, said Ron Pinelli, president of Autodata, an industry statistics firm in Woodcliff Lake, N.J.
And since they have a lock on the market, Detroit's automakers might simply end up competing against each other, rather than taking sales away from Japanese vehicles.
For now, G.M. is maintaining its goal of offering a dozen hybrid models by 2010. It already sells hybrid pickup trucks and will offer a hybrid version of the Saturn Vue sport utility later this summer.
But persuading car shoppers that American brands offer fuel-efficient vehicles is a challenge, Mark R. LaNeve, G.M.'s vice president for North American sales and marketing, conceded this week.
"The Japanese reputation for fuel economy really got set back in the '70s," Mr. LaNeve said during a conference call Tuesday. "This shows you how long it takes, how embedded some consumers' opinions are, and how long it takes to change those opinions."
For his part, Mr. Ford said it was important for car companies to continue developing all types of vehicles so they could keep pace with advancements in fuels. "We need to keep a hand in everything so that when a break comes, we can move fast," he said.
- 193 Transportation