Feeling the Buzz: Ford Goes Electric

“Shares of automaker Ford up 6% today after announcing it will join the electric vehicle party. What will it mean for the U.S. automaker? Could it be the final nail in GM’s coffin? Phil Lebeau, CNBC’s auto reporter is out in the new Ford plant in Wayne, Michigan.

Melissa, we’re actually at the plant right next to the one that’s being retooled, but this is a major commitment from Ford. This is a company that is going to make sure that 3,200 jobs stay here in the Detroit area. They’re investing more than $500 million…

… SUVs, where they used to make $3.5 billion a year in profit off those SUVs, Ford hoping they will now be profitable churning out fuel-efficient cars: the new next generation Focus as well as an electric vehicle that Ford plans to start selling in 2011. This is an ambitious bet. There are more than a few people skeptical that Ford can make money on small cars built here but when we talked to Alan Mulally he said we’ll have lower costs because of the reworked UAW contract, we’ll have economies of scale because all the tooling, all the parts will be the same on the new Ford Focus, the one built here will look like the one built in Europe, which will look like the one built in Asia. That’s the blueprint. Ford make a profit on the Focus remember, they’ve yet to make a dime on the focus. Yet they believe that they can at this plant.” CNBC’s Fast Money 5/6/2009

Ford (F) shares finished the day up 7% on their announcement that they are making the commitment to build electric cars. There is no doubt that Ford is taking a major risk with this move as they are spending millions of dollars to retool existing facilities on the assumption that Americans will buy their new electric products. As the Fast Money gang discussed, the SUVs and trucks have been only cash cow for American automakers, and particularly Ford. CEO Mulally is confident that with the new labor contracts in place and using parts that are already on the Ford Focus they will be able to turn a profit on these vehicles. However, the biggest risk is do enough Americans want to scale down to the electric cars?

Critics of the U.S. automakers have been demanding more innovation and flexibility out of the big three, and this is a step in the right direction. Under the leadership of Mulally, Ford has consistently been the leader in each step of this auto crisis and this is just par for the course for them. We will be very interested to see if this gamble works out, and Ford will have the added benefit of seeing the market’s acceptance of the Chevy (GM) Volt, which will be available a year before the Ford electric car is scheduled to be. Obviously, consumer preferences will play a major role in the success of these two vehicles, but the price of gas will also be a factor. As for right now, with gas prices still relatively cheap it seems that SUVs and trucks will remain the choice for most Americans, but that preference can change very quickly. We have already seen what can happen as gas prices surged last summer.

Original post

Comments

[TB3:]

I just hope Ford is not getting too far ahead of itself with investments in vehicles that so far, only president Obama seems in love with, not the driving public. It's important to remember that despite all the hype from the White House and its environmental allies, Ford is in the business ONLY to make a profit on vehicles that consumers want to buy.

May 07 01:59 PM

[User 409545:]

I believe this is a smart move. The UAW will continue to help Ford since Ford is adding 3,200 new UAW jobs. As you know, the Dems listen to the UAW since they were heavy hitter for them. Now all we need to do is get Americans to buy American products-thats the hard part.

JJ

May 07 02:32 PM

[Speedzzter:]

Undoubtedly the new Wayne plant tooling and line will be flexible, so that FoMoCo can dump the electric toy cars on short notice.

On the other hand, building small cars in America is one of Ford's few potential strategic advantages. Even if the next-gen Focus is not profitable under the UAW-Obama-Radical Green captivity of Ford's microeconomics, it is necessary because of the "two fleets" rule to offset the sorts of larger and high-performance vehicles consumers really want and need.

It is also good business as an active counter to the backlash against perceptions of a predatory Asian invasion of the U.S. auto market (As quality American jobs become more scarce and unstable, it is inevitable that some consumers will turn more "nationalistic" in their durable goods purchases out of a feeling that we're losing too many "good" jobs overseas. Purchase of an "all-American" vehicle instead of an import or "invader"/transplant will seem to many as a symbolic show of support for the American economy and America's industrial future)

It's also a necessary hedge for opposing unreasonable regulatory adjustments of the Corporate Average Fuel Economy standards. Pressure from the courts, California, and Obama's environmental constituents will be to jack fuel economy averages to as much as 40 m.p.g. or more. Ford has to at least try to build and sell small cars in the U.S.A. before it can credibly argue future regulatory increases in these standards are wildly unrealistic. Increasing the U.A.W.'s stake in this debate is brilliant.

Finally, it fits with the "touchy-feely" corporate narrative that FoMoCo is pushing at the present time. (See the Ford Story website) While most of the profits may still come from the working (e.g. trucks) and fun (high performance/sporty) sides of the business, Ford needs a strong smokescreen of "Good Green Global Citizen" claptrap to placate politicians, activist shareholders, special interest groups, and certain members of the Ford family.

May 07 04:11 PM

[sethmcs:]

Who says that electric vehicles need to be small wimpy? Why not a electric F-150? Why not a 22 foot 3.5 ton Lincoln Town Car? Seems to me that diesel-electric technology is old and proven. Trains? Maybe electric technology can do away with the relevance of CAFE.

May 08 12:43 AM

[Fred W:]

Ford has been working with RMI for several years on creating efficient cars and a "sustainable" supply chain...the truth is that Obama is actually "behind" Ford on the green car strategy--for what ever reasons, Ford was lumped in with GM and Chrysler (despite the huge differences)...just easier for analysts that follow each other in a merry-go-round fashion to continue BAU.


On May 07 01:59 PM TB3 wrote:

> I just hope Ford is not getting too far ahead of itself with investments
> in vehicles that so far, only president Obama seems in love with,
> not the driving public. It's important to remember that despite all
> the hype from the White House and its environmental allies, Ford
> is in the business ONLY to make a profit on vehicles that consumers
> want to buy.

May 08 09:57 AM

[31October:]

On May 08 12:43 AM sethmcs wrote:
> Who says that electric vehicles need to be small wimpy? Why not a electric F-150? Why not a 22 foot 3.5 ton Lincoln Town Car? Seems to me that diesel-electric technology is old and proven. Trains? Maybe electric technology can do away with the relevance of CAFE.

Because the entire bed of the truck would have to be filled with batteries to get it across town. Electrics are fun drag racers, but they have one run, then get towed home. Although diesel/electric would be absolutely the best (I'd love one!), a $3000 engine premium + $4000 battery pack premium + $2000 IV transmission premium would make for a pricey ride.

Ford's electric car is a marketing ploy. A smart ploy, but a ploy. Battery energy capacity is nothing compared to gas/diesel. Electric cars very popular and successful in Shanghai and Mumbai. But Boston, Atlanta, Seattle? If you got to work, you couldn't get back.

And to the people about to attack me for not salivating over an electric: Trash me after you actually buy one as your only vehicle.

May 08 10:34 AM

[Dave K.:]

I think it is smart of Ford progressing this way. A recent study shows that converting Bio-mass to electricity and running electric cars is much more efficient use of the energy rather than making ethanol from it. The article is located at www.sciencedaily.com/r...

The company I work for is developing electrical energy storage 1-LTL.com so some bias may exist with my responses.

May 08 03:47 PM

[TinyTim:]

The Volt is a hybrid. Guaranteed to have premium cost. So does this new Ford have an ICE or not?

It's about time other companies are concentrating on all electric plug-in cars. The major automakers are focused on ICE technology, which is why even the Chevy Volt is a hybrid. The only hybrid that makes sense is a "weak" one that is basically a regular ICE car with a small battery and generator to bump MPG using regenerative braking. Other hybrids are just high dollar toys.

All-electrics on the other hand, have the potential to be inexpensive because the drivetrain is simple and cheap. Especially if truck fleets will trigger volume production of batteries, which in turn will help lower the cost of electric cars.

My own criteria for an all-electric around town commuter vehicle is that is has to look like a regular subcompact - Corolla/Yaris, Civic/Fit, or Versa, have a top speed of 80MPH (approx 35KW / 47hp) and get 80 miles plus between charges on a continuous 60 mph course. What's so difficult about these specs?
Of course, this isn't a road trip car or a haul the boat car.
There are a lot of DIYers out there converting cars to close to these specs, displaying a hell of a lot of Yankee ingenuity.

Instead we get everything from high performance primo dollar toys like a Tesla or Wrightspeed, to ugly Chinese knockoffs that are probably not importable due to safety regs.

Since Nissan is touting a basic Versa for less than $10K these days, I would expect an all electric version to be $7500. This is what the Feds should be stimulating with incentives and battery warrantys. Whatever it takes. The market should be huge at this price point, which is the problem for carmakers.
So, unfortunately, I think in the near future, some Asian company like Tata will license a battery technology and make a killing.

May 08 06:17 PM

[TinyTim:]

Remember the VW Bug. In 1958, sold for $1900.

May 08 06:20 PM

[devassocx:]

I hope all this electric stuff goes forward.

I want all of you to buy them and use less gasoline so it will stay cheap and I can continue to enjoy driving my Dodge Magnum wagon.

Thanks for your support and stay safe out there!

May 08 08:41 PM

[ripskii:]

Electric cars are alluring but both the sources and storage of electrical energy are problematic. The major problem confronting the industry in the US is that they have NEVER grasped the concept that smaller cars should be excellent designs. Their many products over the years have normally be cheap, poorly designed vehicles to push buyers into their larger higher profit margin vehicles. Meanwhile both European and Japanese companies supplied us high quality smaller vehicles at premium prices for this segment of the market ignored by the former big three and as a result have taken over that market.

Ford should be looking carefully at our energy situation and designing a slick natural gas/hybrid efficient car that will appeal to people who appreciate a smaller well designed vehicle. With good performance, looks and economy there will be plenty of buyers lining up for such a vehicle with a future.

May 08 10:16 PM

[TinyTim:]

The main reason US carmakers have never embraced high quality small efficient cars like the rest of the world is that the price of gasoline is not taxed up to $8 per gallon like the rest of the world.
Hence, the abundance of Dodge Magnums.

The only hybrid that makes sense to me is a basic ICE vehicle with a generator / capacitor-battery to bump MPG with regenerative braking.

May 09 04:47 PM

[Road Runner:]

I'm still amazed at how many of you posters still don't understand how fast battery technology is evolving, and how manufacturing scale will hugely decrease the cost of batteries. In 10 years, hybrid-electric vehicles (cars, trucks, and SUVs) will be the preferred choice for a new vehicle because the cost will be the same or less than a engine/transmission vehicle, but the mileage and performance will be better.

All-electric vehicles will have a decent share too because eliminating the engine will significantly reduce the price. An all-electric vehicle with a 100 mile range will be a good second car used only for commuting and short weekend trips.

Note that all-electric and hybrid-electric vehicles are very similar in technology and manufacturing, except the hybrid-electric has an engine that charges the battery which is a relatively simple thing to do. So, Ford needs to get in the all-electric business now to perfect its electric vehicle platform, or else it will be too late to enter. Even if the all-electric car proves to be a marketing “oh hum”, it still needs to develop one as the all-electric vehicle is the technical “stepping stone” to hybrid-electric vehicles, which I’m convinced will be very popular.

May 13 02:19 PM