Ford’s John Viera: What an auto company can — and can’t — do about climate change

When it comes to climate change, Ford and its global director of sustainability, John Viera, want to do what they can to be part of the solution. In its latest sustainability report [PDF, download], the company says:

Ford is committed to doing our share to prevent or reduce the potential for environmental, economic and social harm due to climate change.

Viera puts it simply:

Climate change is real. Man has an impact on climate change. We as a company have to do our share.

Behind the rhetoric are actions. Ford has set science-based CO2 targets for North America, Europe, Brazil and China that determine the amount of greenhouse gases that its cars and trucks can emit over time, consistent with stabilizing the concentration of CO2 in the atmosphere at 450 ppm. Along with other automakers, it has agreed to the U.S. government’s fuel efficiency standards that mandate an average fuel economy of 54.5 miles per gallon for the 2025 model year

All of which is well and good. But as John Viera acknowledged to me the other day, all of those good intentions will not take Ford, or the rest of us, where we need to go. Markets — which are beyond Ford’s control — will play a bigger role than corporate commitments or even the CAFE (corporate average fuel economy) rules.

I sat down with John Viera the other day at Net Impact’s 2012 conference, About 2700 mostly young people–MBA students, undergrads and young professionals–gathered in Baltimore to  listen to business leaders, network and attend workshops on careers, investing and activism. (Net Impact is a community of young leaders who want to use the power of business to solve the world’s toughest problems. I’m on the board.)

A Chicago native, John has been with Ford for 28 years. He joined the company right out of  the University of Michigan, where he studied engineering, and worked on a variety of cars and trucks, running factories and dabbling in electric cars and natural gas-powered vehicles. When he was tapped to be the company’s sustainability chief in 2007, he was the chief engineer for couple of truck-based SUVs, the Ford Expedition and Lincoln Navigator. Yes, that was quite a turnabout.

Now, though, he firmly believes that sustainability issues–notably the price and availability of energy, and climate concerns–need to be a central element of the company’s strategy. Ford says that its cars needs to be high quality, smart, safe and green.

But, of course, it’s not as simple as that. Ford can’t force people to buy cars they don’t want. Gasoline prices are a key factor in car-buying decisions. When gas prices hit their historical highs during 2008, topping $4 a gallon in much of the country, Ford sold more small and mid-sized cars than ever before. “We couldn’t keep them in stock,” John said. “The larger vehicles sat on the lot.” That’s to be expected.

Only a year later, though, when gas prices tumbled during the recession, American car buyers reverted to habit, buying bigger cars again. Apparently, we have short memories. “We didn’t expect that,” John said. It’s as if buyers were “driving to the dealership and seeing the gas price on the way” and then making up their mind, he said. Gas prices are literally in your face.

This helps explains Ford’s strategy of providing a variety of fuel options — gasoline, hybrid or plug-in hybrid — for many of its cars, instead of focusing on a signature “green” vehicle like the Toyota Prius, GM Volt or Nissan Leaf.  The company doesn’t know–nobody does–what gas prices will be a year or two or five from now. So its car platforms and manufacturing plants are designed to be flexible when it comes to fuels, and responsive to consumer preferences.

“The mix is not dictated by us,” John says.

What, then, does that say about Ford’s climate change targets or the government’s 54.5 mpg fuel-economy standard?

Unfortunately, it means that they are little more exercises in wishful thinking unless gas prices go up.

Although the Obama administration calls the fuel-economy standards it most important environmental achievement, the so-called mandate includes a midterm review of progress, to be conducted by the end of the decade. The standards can be adjusted if manufacturers are having difficulty meeting the tough new guidelines. As an industry trade group, the Alliance of Automobile Manufacturers, put it in a statement: “Compliance with higher fuel-economy standards is based on sales, not what we put on the showroom floor.”

I point this out not to criticize Ford. The company’s chairman, Bill Ford, has been the most forward-thinking executive in Detroit when it comes to environmental issues. John Viera, too, is a straight shooter, and a great spokesman for Ford.

But let’s not pretend that corporate targets or so-called mandates will do much, if anything, about climate change. They won’t.

The good news–for those of us who worry about climate change, anyway,–is that Ford, at least, believes that gasoline prices are going up. That’s why the company is investing in hybrid and electric cars, and more efficient internal-combustion engines.

“We believe gas prices will eventually keep rising,” John says. “People are going to be more and more interested in fuel-efficient vehicles.”

Of course, if we want to guarantee higher gas prices, we could enact a gasoline tax. That would not only affect the kinds of cars people buy; it would affect how much we drive and, eventually, shape decisions about where to live and even whether to buy a car.

That would be a serious response to a serious problem. We’re not there yet.

Comments

  1. “Markets – which are beyond Ford’s control..”, “..The mix is not dictated by us…”

    In my assessment, when we put the smell detector to the above statements, we find that this is a massive cop-out. A subtle one, but a cop-out nonetheless.

    Why? Well basically this is saying that Viera’s colleague, Ford’s VP of Marketing is deadweight and that his entire marketing budget is being wasted, because Ford is a passive seller of standardized commodities? Hmmm…

    The auto industry, and Ford in particular, spend massive amounts of money on marketing – programs to influence the habits and choices customer who buy cars. SUV’s for example are an impractical choice in many cases: waste a good amount of fuel, can be difficult to park & manoeuvre, and so on. Some are downright ugly and brutish by any typical aesthetic standards. But look: over the past couple of decades SUV’s have sold more and more. Because….someobdy….specifcally Ford and its competors…have systematically and deliberately invested A LOT of money on marketing designed to make these things “cool” and “must buy”.

    Now ask yourself: just exactly what percentage of Ford’s marketing budget is dedicated to making electric cars, extremely fuel efficient cars, etc to be seen as “cool”, “desirable” and “must buy”? And what percentage of it is dedicated towards making tarted up F150s (aka industrial transport tools) cool and desirable? Oh my….

    As such, I can only conclude that we are being fed state of the art greenwashing here. There is a massive gap between Ford’s flowery statements and any kind of commitment to MAKING change.

  2. Marc Gunther says:

    Sam, this is a good point about marketing. You’re right, obviously, that auto companies can shape the mix. One flaw of Ford’s strategy, I think, is that they don’t have a signature, visible EV or hybrid like the Volt, Leaf or Prius that enables them to aggressively sell the benefits of electric cars. But–and I think this is important–despite all the marketing the GM and Nissan have put behind their electrics, and despite a $7500 government tax credit for car buyers, sales have been tepid. So there are limits to what marketing and govt policy can do.

    • Marc,

      When Toyota brought the Prius to market, it was “ready for prime time”; it sold well and it was reliable.

      The Nissan Leaf, on the other hand, was and is “not ready for prime time”. The Leaf’s limited range and long recharge time severely restrict its utility as other than a “cute” second car.

      The Chevy Volt was even less “ready for prime time”, as a couple of total loss fires have demonstrated.

      Ford offers and has offered hybrid vehicles. It has just introduced an EV. They might not have the “flash” of the Volt or the Leaf, but the have a better track record.

  3. Marc, you say there are limits to what marketing can do?

    How is it possible that the auto industry can manage to make SUVs desirable and yet you claim there is only so much they can do with marketing. Doesnt stand up to the facts:

    What are the facts: the SUV category was basically created by the auto industry to consumerize and “lifestyle-ize” what was previously a specialist niche of 4×4 and pickups, cars which were generally larger and less fuel efficient than consumer transport. Also too big to really be convient to manouver and park in cities.

    Yet in any major city in the US, the automakers – Ford in the lead from the early days of Ford Explorer – have managed to make SUVs wildly popular. Even the relatively ugly industrial aesthetic of the cars, Fod and co have sold the consumer on the idea that these cars are macho (for men) and safe (for women).

    This is pure marketing: I convince you to buy a car that is far larger and far more expensive to operate than you need. Because it is “cool”. And I then profit from the artificially stimulated demand. Thats in black and white in Ford and any US other automaker’s annual report and accounts: their profit and competitive strategies lie right here in keeping these large, gas guzzling cars popular and in demand.

    But now we are all supposed to raise our hands and say “oh they cant do anything with marketing”? No, it was Ford and co’s marketing that got us in this situation in the first place. And they are profiting from it over the years. S

    So we wont solve this situation until people like John Vieira (head of ford Sustainability) make it clear to Ford that their sustainability mission is a sham if they dont turn their marketing and business strategy guns on this problem and start making fuel-efficient and electric cars “cool”. THAT is what “doing our share” (Fords own words) actually means.

    But at the moment they are far from doing anything of the sort.

    I dont mind if a company puts it on the table and says “no we dont believe in this”. What I find really socially damaging is when they pull this kind of sophisticated greenwashing right here, which is to basically acknowledge their contribution to the problem and then pretend that they are a passive recepient of forces rather than a central actor and instigator.

    Nothing will happen here until Ford takes its snout out of the trough and makes it it’s own business and mission to turn fuel efficient cars into not just a cool and profitable category, but the actual driver of industry growth. The will and backbone is what are lacking in Ford and their industry friends. If Ford could find a way to make industrial trucks sexy for the consumer, they can do it with eco-cars. They need to stop pretending they cant – in fact they dont want to.

    • Marc Gunther says:

      Sam, I don’t think corporations and their marketing arms are quite as powerful as you seem to think.

      And I think consumers have to take some responsibility for their choices. I don’t think people drive SUVs only or even primarily because of advertising. They probably like them, strange as that may seem to you.

      You can be sure that Ford will do its best to make the C-Max or the Escape hybrid cool and fun. But if people want to drive an Explorer, they will.

      The best way to change that is by changing the economics of car ownership, through higher fuel prices.

  4. Full disclosure: I work for Ford Motor Company. Before I started working at Ford, however, I purchased the very first model of the Prius. I remember that it did not sell very well for the first few years, so I guess that it was not really ready for prime time. It was okay. The engine light came on mysteriously after the waranty was over and the dealership couldn’t figure out why. Toyota replaced the entire engine for free. It was nice of them, but they wanted the old engine for testing too. It got about 5 mpg less (35mpg)in our Michigan winter than in the summer(40mpg). And it was ugly. About as ugly as the current Prius.

    Iwould like to point out that Toyota makes all the same size SUV’s that Ford makes, and a full size pick-up truck. I think Toyota would love to sell as many SUV’s as Ford does. However, I think it is all in the meme. When people think hybrid, they think Prius. When people think SUV, they think Explorer , and subsequently, Ford. The Explorer was panned by the automotive press, but Ford sells tons of them. Even with the Explorer being associated with the past rollover and tire issues, people still buy them over what Toyota has to offer. It’s hard to get past the meme.

    My next car will be either the C-Max Energi or the Fusion Energi plug in. Ford has been doing a lot of marketing to position the C-Max as a Prius fighter. That’s going to be a hard sell no matter how good the C-Max is becaue it has to fight the meme.

    • Marc Gunther says:

      Thanks for your comment, Eric, you make a good point. The aura of the Prius has helped “green” Toyota even though the company makes SUVs and pickups.

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