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Ford's Scheele Wants Debate on Green Technology, Policy

By Joe Wiesenfelder

CHICAGO — Nick Scheele, president and chief operating officer of Ford Motor Company, called for debate on the merits of fuel-saving technologies and the policies that dictate environmental regulations.

His comments, in an interview at a Midwest Automotive Media Association (MAMA) luncheon, came at a period of sport utility vehicle fuel economy in the news. The same week, two environmental groups aired a new anti-SUV television commercial and two others threatened to disrupt Ford’s centennial celebration. Additionally, the Hummer H2 ranked last in a J.D. Power Initial Quality Study in which some owners expressed dissatisfaction with its fuel economy.

The Big Three domestic manufacturers draw the most heat from activists, and Ford is under heavier fire because it stated in April that it will not meet the SUV fuel-economy goal established in July 2000 by former CEO Jac Nasser. The goal was to increase fuel economy among SUV models by 25 percent, from 18 mpg to 23 mpg, average. The company has cited a 7 percent improvement in the past two years. Fueled in part by this recantation, the Rainforest Action Network and Global Exchange plan to protest Ford dealerships and events tied to its 100th anniversary, scheduled for June 14-15.

“We haven’t retracted our commitment to get to a 25 percent SUV improvement,” Scheele said. “It’s just very clear that people are buying bigger SUVs with more powerful engines. So we haven’t cancelled it, we’ve said we don’t know when it’s going to arrive. But we will have the technologies there, and we will see an improvement. We’ve already seen very significant improvement in SUV fuel economy. When we introduced the Escape, that clearly upped our SUV fuel economy.”

The compact Escape is Ford’s smallest SUV, introduced in the 2001 model year. (A more miserly gasoline-electric hybrid version promised for later this year will be sold only in limited numbers to fleets until the second half of 2004, when it goes on sale to the general public.)

Scheele had not yet seen the TV commercial, the third from syndicated columnist Arianna Huffington’s Detroit Project and the National Resources Defense Council. The spot, which is not aimed at any one manufacturer, unveils a mythical SUV model that “can take America to work in the morning without taking it to war in the afternoon.”

Asked if he thought anti-SUV movement was gaining momentum, Scheele said he didn’t know, but research Ford had conducted when the Detroit Project launched suggested that its first commercial had no impact “if you were thinking of or had ever contemplated driving an SUV, or were actually driving one,” he said. “It didn’t change your consideration.”

“If you were an environmentalist who would never even consider an SUV, for environmental reasons, you were reconfirmed in that view as well,” he said. “It was very much a polarizing campaign. Whether that continues to be the case, I think that is something we’ll research.”

Scheele echoes counterparts at other automobile companies who believe the demand for hybrids and other fuel-saving technologies, which tend to cost more upfront, is overstated. “We will have a hybrid out there,” he said. “So we have the technologies. But at the end of the day, we can provide the technologies until we’re blue in the face. It’s customers who decide what they’re going to buy.

“The question is, with gas prices at their present level, where is the incentive for people to pay more and not to realize that in in-pocket cash?” he said. “The incentives that the government was talking about would have made a major bridge across that gap. What’s going to happen to the incentives that were in last year’s energy bill that didn’t clear Congress? Will they stay in for this year’s energy bill? Will the bill clear Congress this year? That will make a big difference, I think, to people’s buying intentions.

“There’s no question that with gas prices at near-record lows, the incentive is different,” Scheele said. “If we harken back just 20 years ago — the second oil shock — gas prices went through the roof, but gas availability and the pump lines were the issue. What happened was people moved to four-cylinder cars and everyone was talking fuel economy. As soon as availability came back and prices came down . . . the Taurus was originally designed with just a four-cylinder engine. And in ’83, we said, Oops, we’d better get a V-6 in there. That’s how quickly people change.”

Scheele seems to have studied a page written by Bob Lutz, General Motors’ vice chairman of product development, who advocates controlling consumption by taxing the limited resource — in this case fuel. Scheele said, “For years and years cigarettes were cheap, and nobody would tax cigarettes because that [represented] votes in a few states. People finally got serious about cigarettes and they started taxing them, and lo and behold, cigarette consumption has gone down. Most public policy which requires tough decisions and tradeoffs has been steered or guided by taxation policy, not by wishing it were so. That is another debate that I think should happen. Everybody said they’d lose seats [in Congress] if they taxed tobacco and alcohol . . . it doesn’t appear to be so. I’m not advocating one way or the other. I’m saying if you want to change private purchasing policy, it usually happens through the pocketbook.”

Scheele uses his native Great Britain as an example of taxation — and tax breaks — in support of environmental policies. “Since the start of this year, Britain has instituted a [carbon dioxide (CO2)] tax on vehicles, and the tax is dependent upon tailpipe CO2 emissions,” he said. “It is a very fast slope. In March, which is the plate-change month in Britain, the sales of diesel in Britain were nearly 50 percent — a huge change in just two years.”

In Great Britain and much of Europe, environmental concerns have turned away from the conventional pollutants and toward carbon dioxide, a greenhouse gas that is an unavoidable by-product of combustion but that also is directly proportional to the amount of fuel burned. Diesel engines have taken off as a result. “Diesel [technology] offers an almost immediate 30 percent fuel economy improvement — in some cases more,” Scheele said. “It is something we could very readily move toward.”

There are few signs that the United States will follow suit. The Bush Administration withdrew from the Kyoto Protocol, which calls for signatory countries to decrease greenhouse gas emissions. Though the White House is calling for decreased dependence on foreign oil, this isn’t reflected in current federal law. Though restrictions on conventional pollutants are increasingly stringent, fuel economy requirements haven’t changed significantly in decades.

“If the issue and the drive is for CO2 reduction and a reduction in the dependence on foreign oil, we believe that diesel is the most immediate response that is available for the industry,” Scheele said.

Scheele said history is part of what stands in the way of diesel adoption in the U.S. “There is an emotional component to most people’s view of diesel, particularly most legislatures,” he said. “They remember a competitor’s diesel engine of the early ’80s.” That competitor is General Motors, whose diesel engines — poorly adapted gasoline powerplants — were by all accounts noisy, smoky failures.

“Modern diesels are not like that, but to get over that emotional hump is a big issue,” Scheele continued. “The other big issue is soot and particulates and carcinogens. [Diesels in Europe] have particulate traps, and they’re required to be urea filled. There’s a lot of intense debate about whether that is a solution.”

The traps filter particulates from the exhaust stream. Many modern diesels inject liquid urea into the combustion process or the exhaust system to catalyze oxides of nitrogen, a tightly restricted pollutant in the U.S. that conventional diesels emit in disproportionate amounts. The debate stems from concerns that Americans would balk at having to fill a urea reservoir along with their fuel tank — or fail to do so, defeating the pollution controls.

“We’re happy to debate it,” Scheele said. “The debate is very difficult to engage on the level I believe it should be held, which is non-emotional and science fact as of right now.”

Asked what Ford would do, aside from diesel engines and hybrids, to raise its vehicles’ fuel economy, Scheele said, “We can go for six-speed transmissions, we can go for CVTs [continuously variable transmissions], we can go for more modern engines, we can go for lighter weight. And we’re doing all those things, but they all cost. . . Today the conventional transmission is four-speed. Some, particularly premium vehicles, are five speeds. To go to six speeds costs more. Modern engines cost more. Lighter weight materials are generally more expensive.”

Scheele acknowledged that diesel engines have cost drawbacks as well. “A diesel engine is more expensive than gas, and if you put full traps on it, it’s even more expensive. But that’s the debate we should have. It is a cost factor, but it’s the only technology I know today that can readily deliver that kind of benefit. There’s nothing else that can deliver in volume.

“The problem is there is no single, silver-bullet solution to this,” he said. “What we want to do is have a debate that recognizes that there isn’t a silver bullet — that this is a question of compromise, as with anything else in life.”

Copyright 2003;
Image by Joe Wiesenfelder,

(Photo)Nick Scheele, Ford president and chief operating officer, discussed fuel-economy issues at a recent Midwest Automotive Media Association gathering at the Chicago Historical Society.

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