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Ford bails out on hybrid promise

Bryce G. Hoffman and Deb Price / The Detroit News

Ford Motor Co. Chairman and CEO Bill Ford Jr. is backing away from his much-publicized commitment to produce 250,000 hybrid vehicles a year by the end of the decade, saying the company intends to pursue a broader environmental strategy that focuses more on other alternative-fuel vehicles.

With timing perhaps intended to blunt criticism of the move, Bill Ford announced the strategic shift in an e-mail to employees Wednesday, the same day he and the CEOs of General Motors Corp. and DaimlerChrysler AG's Chrysler Group sent a letter to Congress promising to double their annual production of alternative-fuel vehicles to 2 million by 2010.

Critics decried the back-pedaling on hybrids as another broken promise by the automaker to build more fuel-efficient vehicles.

Bill Ford's hybrid pledge, made last September, was the centerpiece of a national advertising campaign touting the company as an environmental and innovation leader.

"What I didn't foresee at the time was how rapidly other technologies would evolve," Bill Ford wrote in the e-mail, obtained by The Detroit News. "Now, I am convinced that the objective we had set earlier to build capacity for 250,000 hybrids at the end of the decade is too narrow to achieve our larger goals of substantially improving fuel economy and CO2 performance."

Bill Ford said the company will now focus more on other fuels like ethanol, clean diesel and bio-diesel, as well as advanced engine and powertrain technologies.

Later today, Ford will announce a new partnership with VeraSun Energy to create a Midwest "ethanol corridor" with about 50 new E85 fueling stations between Kansas City and Chicago.

"Our strategy going forward is not to wed ourselves to a single technology, but to manage a more flexible approach to meet our goals for customer needs, environmental impact and shareholder interests," Bill Ford said.

Ford is not abandoning hybrids. The company still plans to introduce gas-electric hybrid versions of the Mazda Tribute sport utility vehicle in 2007 and the Ford Fusion and Mercury Milan sedans in 2008.

The company will soon announce that it is opening a new hybrid research-and-development center at its Volvo subsidiary in Sweden that will concentrate on producing hybrids for the European market.

Another broken promise?

The hybrid strategy shift is another example of how Ford is rethinking its business strategy as part of its "way forward" restructuring effort that was launched in January by Mark Fields, the newly appointed head of Ford's Americas group.

Two Ford sources familiar with the situation say there was concern among Ford engineers and others in the company last fall that a public promise to build 250,000 hybrids was going too far and might not be achievable.

Others argued that Bill Ford had to make a strong pledge to kick off Ford's national marketing campaign touting innovation and environmental leadership.

Ford's hybrid chief Mary Ann Wright resigned soon after Bill Ford's pledge to build 250,000 hybrid vehicles a year.

"There were business considerations and there were consumer-focused considerations" for backing away from the hybrid pledge, said Ford spokesman Oscar Suris. "We believe that this plan will make more strategic sense here."

Suris said consumer interest has shifted toward alternative-fuel vehicles in recent months. Environmentalists aren't so sure.

"We definitely think that the demand is there for hybrids," said Mike Hudema, who heads the oil independence initiative at Global Exchange in San Francisco. "We don't see the ethanol infrastructure there."

Hudema said the automaker's decision represents another broken promise from Bill Ford.

Ford "said it would increase the fuel economy of its SUVs. Ford reneged on that. Then he promised to build 250,000 hybrids by 2010. Now we're seeing them renege on that promise. What we haven't seen them renege on is being at the bottom of the barrel when it comes to average fuel economy."

In 2000, Ford promised to raise the fuel economy of its SUV fleet by 25 percent over five years, but abandoned that commitment three years later.

In the 1990s, Ford and the other Detroit automakers promised to develop prototypes for 80-mpg "supercars" by 2000 as part of a deal with the Clinton administration. All three missed that mark and the program was abandoned when George W. Bush took office in 2001. The Bush administration shifted the focus to hydrogen-powered fuel cells, but many experts believe it could be decades before hydrogen vehicles are produced in large numbers.

Hudema and other environmentalists are also concerned that current methods of producing ethanol offset emissions and fuel economy gains of ethanol-powered vehicles.

In their letter to Congress Wednesday, Bill Ford, GM CEO Rick Wagoner and Chrysler Group President and CEO Tom LaSorda, said their companies are doing their part to reduce America's dependence on oil and urged fuel companies to boost production of ethanol and other biofuels and install more pumps. Today, the nation's 170,000 gas stations have 700 E85 pumps, making it difficult for owners of the 5 million flexible-fuel vehicles on the road to fill up with anything but gasoline.

The letter was sent a day before lawmakers go back to their districts for the July Fourth recess, when gas prices will be among the top priorities of their constituents. Environmentalists are pushing lawmakers to boost fuel-economy standards to reduce gas use.

U.S. Rep. Pete Hoekstra, R-Holland, praised the automakers and said the step will be warmly received by Congress. He added that Congress may need to give more tax incentives for stations to add E85 pumps, but predicted that the greater number of flex-fuel vehicles will drive down the cost of alternative fuels and therefore increase demand for more pumps.

"It's a great step by the automakers," Hoekstra said.

No one wants the blame

Spokespeople for the oil industry and environmentalists were cool to the letter.

"The oil industry doesn't own the stations," said John Felmy, chief economist at the American Petroleum Institute, the oil industry's trade group. "What they are calling for is to shift the cost to thousands of independent businessmen who could invest in the pumps and never sell enough to warrant it.

"If the auto industry believes so heavily in the E85 pumps, why don't they put the pumps in at their car dealers?"

Dan Becker, director of the Sierra Club's global warming program, accused the automakers of trying to sell more flex-fuel cars simply to get a credit of 1.2 miles per gallon on their federal Corporate Average Fuel Economy (CAFE) standards so they can sell more "gas guzzling" SUVs and light trucks.

"They're trying to say they are doing something besides making gas guzzlers," Becker said. "The only reason they make E85 vehicles is to weaken CAFE standards."

The automakers' step followed meetings with congressional leaders last month on how alternative fuels can help reduce U.S. dependence on foreign oil.

"Vehicles alone will not get the job done," the CEOs wrote.

"To capitalize on this commitment, Congress and the administration need to continue to promote the production of biofuels, increase incentives for refueling infrastructure and continue incentives for automakers to produce biofuel vehicles.

"Eventually, we need to get to the point where most Americans have reasonable access to these fuels at a price that is competitive with gasoline."
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