Ford Drops Focus on Hybrids, Shifts to Biofuels

By Kevin Krolicki
Reuters

Friday 30 June 2006

Detroit - In a sharp shift of strategy, Ford Motor Co. plans to focus less on hybrid technology and more on a wider range of alternatives to traditional gasoline-powered engines, Ford Chief Executive Bill Ford told employees of the automaker.

Ford backed away from a commitment made last fall to build capacity to make 250,000 hybrid vehicles by the end of the decade, calling that goal "too narrow" in a company-wide e-mail message released Thursday.

Ford, which has faced criticism for lacking a consistent vision for its product development, had heavily promoted its commitment to hybrid technology, which taps battery power to boost fuel economy.

The debate over the emerging group of alternatives to traditional combustion engines comes as US consumers put an increasing premium on fuel efficiency and low operating costs in the face of high gasoline prices.

The shift in consumer preference has hurt all of the Detroit-based automakers, but the stakes are particularly high for Ford, whose fleet of vehicles has the lowest average mileage per gallon of any of the automakers and which relies on light trucks for two-thirds of sales.

"Our strategy going forward is not to wed ourselves to a single technology," Ford said. "The strategy doesn't focus on one catch-all solution but offers a flexible array of options, including hybrids, clean diesels, bio-diesels, advanced engine technologies and E85 ethanol."

Environmental activists charged Ford with breaking an important commitment and trying to exploit a loophole that would allow it to raise the reported fuel economy of its fleet by making more vehicles capable of running on ethanol.

"We know now that Ford Motor Company cannot be relied upon to tell the truth or even to compete effectively with the more efficient fleets of foreign competitors like Honda and Toyota," said Dan Becker, director of Sierra Club's Global Warning Program.

Under the US Corporate Average Fuel Economy standards, automakers get a credit for producing ethanol-ready vehicles, including SUVs, although most continue to burn only gasoline given the small number of ethanol pumps in the United States.

"I think Ford's turn toward ethanol is a coldly calculated move to continue producing more gas-guzzling trucks and SUVs." said Jennifer Krill of the San Francisco-based Rainforest Action Network. "Ford's environmental problems are directly linked to its economic problems."

Big Three Go for Biofuel

Ford spokesman Said Deep said that criticism was misplaced since the automaker's commitment to improve fuel economy was unchanged despite the move away from hybrids.

Ford beat its US rivals in offering the first American-made full hybrids, which offer sharply improved gas mileage through the use of a battery that recharges during braking and powers the vehicle at low speeds.

But Ford has to resort to sales incentives to sell its Escape Hybrid and Mercury Mariner Hybrid models, a sharp contrast to the success that Toyota has seen with its sold-out Prius hybrid.

Ford's change in strategy comes as US automakers have offered a pledge to more than double their annual production of vehicles capable of running on renewable fuels such as ethanol to two million cars and trucks by 2010.

Ethanol is made from sugar derived from plants such as corn, straw and switch grass. Although it is almost a third less efficient than gasoline, proponents call it a renewable fuel.

The commitment to renewable fuels followed a meeting last month between the CEOs of Ford, General Motors Corp., the Chrysler Group and congressional leaders on efforts to reduce US dependence on foreign oil.

The executives and lawmakers also discussed way to help the struggling Detroit-based carmakers better compete with rivals such as Toyota and Honda Motor Co.

Bill Ford, who assumed operational responsibility in early April for the automaker founded by his great grandfather, told employees that the emphasis on other technologies did not change the company's drive for improved fuel economy and lower emissions of carbon dioxide, linked to global warming.

"While we will continue to develop and expand our hybrid portfolio in the US and around the world, the broader array of technologies we are adopting will yield a net improvement for both customers and the environment," he said.