Bloomberg News

Ford Boosts Investment for Battery-Powered Cars

August 15, 2012

Ford Motor Co. (F:US), debuting five battery-powered models this year, is spending $135 million to design electric-drive parts and double battery testing capacity.

Ford is moving more battery research in-house and has hired 60 engineers in the last year, bringing its electric-vehicle engineering staff to more than 1,000, according to a statement today. The moves help reduce the cost of hybrid systems by 30 percent and speed development by 25 percent, Ford said.

Almost all of the electric-vehicle engineers will work under the same roof to foster “an innovative atmosphere,” Joe Bakaj, Ford’s vice president of powertrain engineering, told reporters in Dearborn, Michigan. Some of the $135 million includes a U.S. Energy Department grant, Christin Baker, a Ford spokeswoman, said in an e-mail.

Ford has said hybrids, plug-in hybrids, and all-electric cars will account for as much as 25 percent of its new vehicle sales by 2020, from less than 3 percent last year. The second- largest U.S. automaker is competing in the nascent market for electrified vehicles with Toyota Motor Corp. (7203), General Motors Co. (GM:US), Nissan Motor Co. and startups such as Tesla Motors Inc. (TSLA:US) and closely held Fisker Automotive Inc.

Ford said it plans to hire “dozens” of additional engineers for electric-vehicle development. It’s also renaming its 285,000-square-foot (26,477-square-meter) advanced engineering center in Dearborn the “Ford Advanced Electrification Center.”

Electrified vehicles accounted for 3.4 percent of the U.S. market in this year’s first half, up from 2.2 percent a year earlier, according to researcher LMC Automotive. Hybrids fell to 2.2 percent of the U.S. market last year, down from 2.4 percent in 2010 and 2.8 percent in 2009, LMC said.

Ford’s Share

Ford, based in Dearborn, had just 4 percent of the U.S. hybrid and electric-vehicle market in the year’s first half, compared with 72 percent for Toyota, said Mike Omotoso, a Troy, Michigan-based researcher for LMC. Ford’s share of the hybrid market fell from 11 percent in the first half of last year because the automaker is discontinuing the slow-selling Escape hybrid, Omotoso said.

The automaker hasn’t sold more electrified vehicles because “we are dependent on the price of gas,” Bakaj said. “But when you look over the long term, it’s still our feeling gas prices will rise.” The national average price of unleaded gasoline was $3.71 a gallon yesterday, according to AAA.

Ford research showed 60 percent of customers would buy a hybrid or electric vehicle if there was no price penalty, Bakaj said. When customers are asked if they would accept a higher price if the premium is paid off in four years, 26 percent say they’d still be interested in a hybrid or electric, he said.

‘Significant Number’

“That’s still a very significant number,” Bakaj said. “We know fundamentally there are customers who want to buy these products.”

Ford was the first U.S. automaker to sell a hybrid when it debuted a gasoline and electric powered version of the Escape sport-utility vehicle in 2004. Sales of its Fusion hybrid sedan are down 22 percent this year, to 6,097, according to researcher Autodata Corp.

Ford began selling an electric version of its Focus compact car in May for $39,200. Later this year, Ford will introduce hybrid and plug-in hybrid versions of the C-Max wagon, a model coming from Europe. A new version of the Fusion hybrid, which gets 47 miles (76 kilometers) per gallon in city driving, is also coming this year. Production of a plug-in Fusion sedan starts at year-end.

Mulally’s Plan

Chief Executive Officer Alan Mulally has made fuel- efficiency central to his turnaround plan for Ford. He said in April that Ford wouldn’t back off its ambitious sales goals for electric-powered vehicles just because they get off to a slow start.

“We believe that the electrification of vehicles is going to continue as the battery cost comes down, as we move to generate electricity cleanly,” Mulally told reporters in Laguna Niguel, California, that month. “We see this as continually growing. This is a long-term journey.”

Ford gained 0.5 percent to $9.49 at the close in New York and fell to $9.48 at 8:04 p.m. New York time after the end of regular trading. The shares have slid 12 percent this year.

To contact the reporter on this story: Keith Naughton in Dearborn, Michigan, at knaughton3@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net


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Companies Mentioned

  • F
    (Ford Motor Co)
    • $17.78 USD
    • -0.04
    • -0.22%
  • GM
    (General Motors Co)
    • $37.41 USD
    • -0.35
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