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. [click to continue...]

Electric cars: all systems go

Despite the disappointments of Copenhagen, despite the inaction on climate-change regulation in Congress, despite the global recession, the momentum behind electric cars keeps building.

Yesterday, Better Place, the Silicon Valley-based electric car startup, raised $350 million in financing—the biggest clean tech investment ever, the company said, and a validation of a business model that has been scoffed at by the auto industry. The investment round, led by HSBC, values Better Place, which has yet to put a car on the road, at $1.25 billion.

“Electric vehicles are, at this point, inevitable,” said Jason Wolf, vice president of Better Place. “We’ve broken through, and there’s no turning back.”

Big automakers, meanwhile, are pushing forward with their electric offerings, as executives from Nissan and Ford affirmed yesterday during a “Green Car Summit” held at the U.S. Capitol.

Nissan Leaf

Nissan Leaf

Nissan has been taking its all-electric Leaf, which will be introduced next fall, on a 24-city U.S. tour.  “The market is ready,” said Scott Becker, senior vice president of Nissan North America. “We’ve had an incredible reaction from consumers.” He said more than 38,000 people have signed up to get more information about the car.

“This is going to be a vehicle designed and made for the mass market,” Becker said. The car will have a range of about 100 miles before needing a new charge, good enough to meet the needs of 90% of U.S. drivers.

Lots of forces will bring an array of new electric cars to market in 2010 and 2011–technological improvements in batteries, concerns about climate change (despite legislative foot-dragging), worries about the U.S.’s dependence on imported oil and, most of all, the increasingly attractive economics around electric cars, which we’ll get to in a moment.

Having said that,  significant disagreements remain even among electric-car advocates about how fast the new technology will be adopted, and what form it will take. Will gas-electric hybrids like the Toyota Prius or Ford Fusion dominate, or will the market shift to plug-in hybrids like the Chevy Volt or all-electrics like the Leaf? Will electric cars be a niche business, a mainstream product or–maybe, just maybe–will they come to dominate? Or are they being overhyped? Certainly, there’s no shortage of skepticism out there, particularly from auto-industry incumbents.

“Yes, you will have the intellectual guys who drive electric vehicles,” scoffed Stefan Jacoby, CEO of Volkswagen Group of America, who spoke at the “green car” event. But, he argued, mass-market consumers won’t pay a premium for electric cars and they don’t want to deal with the hassle of charging their car batteries.

When Jason Wolf of Better Place opined that 50% of new car sales could be electric by 2020, Jacoby shot back: “That’s totally impossible. We need to be realistic.”

Still, Better Place has made more progress in the last couple of years–during a global economic meltdown–than most people would have expected. It’s got the support of the governments of Israel and Denmark for widespread rollouts, which require

Renault Fluence ZE

Renault Fluence ZE

building charging stations as well as battery-switching operations throughout those two countries. (The Better Place model envisions battery switches for long trips.) It’s got a commitment from Renault build 100,000 electric cars, a new model known as the Fluence ZE (for zero emissions, a car that I wrote about here.) And yesterday’s round of Series B funding brings in new investors including HSBC, Morgan Stanley Investment Management, and Lazard Asset Management. Charles Stonehill, Better Place’s CFO, wrote on the company’s blog:

Our investors represent some of the largest financial institutions in the world, employing exceptionally thorough due diligence processes that are commensurate with the size of investment.

Given Renault’s commitment and the infusion of equity, don’t be surprised if the next country where Better Place rolls out its cars and its unique business model is France. Higher gasoline prices in Europe make Better Place a better business there.

Which brings us to the economics. While you’ll get arguments about the specific numbers, most people who have looked at electric cars will tell you that as battery costs come down, electric-powered engines are more efficient and less expensive to operate that gas-powered ones. Better Place’s Wolf says the cost per mile of fueling an electric car is two to three cents for the electricity, plus another five to six cents for the battery when amortized over the life of the car. Figure a dime a mile. In the U.S., with gasoline priced at $3, powering a car with gas costs 12-14 cents a mile. In Europe, where drivers pay $6 to $8 per gallon of gas, you can double that. The point is, there’s enough money to be made so that carmakers and consumers can both do well as electrics roll out, even though the upfront costs of an electric car are higher.

Not surprisingly, the start-up companies who are building only electric cars expect the technology to be embraced relatively quickly and widely. Established automakers, even those committed to electrics, are more cautious.

“We view this as a revolutionary journey,” said Nancy Gioia, director of global electrification at Ford Motor. Evolution might be more like it: By 2020, she said, Ford expects that between 10 and 25% of its new car sales will be electric. The bulk of those, she added, will be hybrids like the Fusion. With a hybrid, a gasoline engine can be used to overcome what the industry calls “range anxiety”–the driver’s worry that a battery could run out on long trips.

But Kevin Czinger, the dynamic CEO of CODA Automotive (who will be speaking at FORTUNE’s Brainstorm Green), proudly says that his company will be “100 percent independent of the oil industry.” CODA intends to start small, selling cars only in California beginning later this year, but Czinger is counting on market dynamics to both improve the product and drive sales.

“Do I think I can sell 1,000 high quality electric cars in California? Absolutely,” he said. That will signal markets that the business is real. “Do I know what the market will do with that signal? No. But market forces should work to drive down costs and drive up performance.”

He’s got a point. You never know what will happen with a disruptive technology comes along. When is the last time you bought a CD? Or a a new landline phone?

Says Czinger: “We envision an affordable electric car in every American garage.”

An automaker’s bizarre lament

Crazy but true: A California-based electric car company that wants to make inflatable cars, using pressure membrane technology developed by the aerospace industry, is indignant because the government won’t give it money to do so.

This is what our Bailout Nation is coming to: XP Vehicles, whose website won’t say who is running the company because “it is too easy for our competitors to poach them,” is calling upon supporters to write to Congress because the U.S. Department of Energy rejected its application form for an Advanced Technology Vehicles Manufacturing Loan.

The company says:

The DOE reviewers, mostly from “Detroit”, have turned down XP’s loan application in favor of “Detroit” players. Are we a national where innovation and great ideas win support or where great influence buyers win the support? If you want an XP Vehicle, call Congress now and ask for action!

Now it’s true that Ford ($5.9 billion), Nissan ($1.6 billion) and Tesla ($465 million) were awarded loans under the $25-billion federal program in June. They’ll use the money to build or rebuild plants in Michigan, Tennessee and California, the interest rate is a very low 5% and they’ve got 25 years to pay the money back. If you don’t think politics comes into play when that kind of money is doled out, you’ve not spent much time in Washington.

A car you'll likely never see

A car you'll likely never see

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Obama’s dumb $8-billion car loans

Yesterday I blogged about economist Steve Fazzari and his arguments on behalf of the Obama administration’s $8 billion in loans to automakers Ford, Nissan and Tesla to make electric and fuel-efficient cars. Today, an opposing view comes from Russ Roberts, a libertarian economist who is a professor at George Mason University, a research fellow at Stanford University’s Hoover Institution, the host of the excellent podcast EconTalk and a blogger at www.cafehayek.com.

Steve, Russ and I spent time together recently at a retreat for journalists and economists organized by the Murray Weidenbaum Center on the Economy, Government and Public Policy at Washington University in St. Louis.  What struck me was how smart, thoughtful economists can see the world so differently. If you’d like to delve further into these issues, you can listen to my podcasts with Steve and Russ at The Energy Collective, or listen to an in-depth conversation about Keynesian economics between Russ and Steve here at EconTalk. A correction to my podcast: Although I say that the administration is giving loan guarantees to the automakers, the government in fact is making low-interest loans directly to Ford, Nissan and Tesla—a concept that Russ finds troubling, and not just because Tesla builds $100,000 sports cars for millionaires.

Tesla roadster

Tesla roadster

The economy’s a mess, Russ Roberts says, in part because the government promoted cheap credit and fueled a housing bubble. The Fed kept interest rates too low for too long, while government-sponsored enterprises Fannie Mae and Freddie Mac poured money into risky mortgages. So, he goes on, “it’s kind of ironic that, as we try to cope with that mess, we continue with the same fundamental idea–let’s try to artificially alter the rate at which people can borrow so they can do more of what appear to be good things.”

“In the past, it was home ownership,” he says. “Now it’s manufacturing and green technology.”

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Obama’s smart $8-billion jolt for electric cars

I’m trying something different this week on the blog, in part because I’m on vacation. Recently, I had the great pleasure of attending a retreat for journalists organized by the Murray Weidenbaum Center on the Economy, Government and Public Policy at Washington University in St. Louis. The event was held on Cape Cod, at the lovely Wianno Club in Osterville, Mass., and while time was set aside for golf, tennis or sightseeing, we engaged in a lot of  learning, discussion and debate with economists and political scientists from the Weidenbaum Center and elsewhere.

I spent time there with a bunch of smart, interesting and lively people, including two economists, Steven Fazzari, who teaches at Wash U.,  and Russ Roberts, who teaches at George Mason and hosts one of my favorite podcasts, EconTalk. Steve is a Keynesian and Russ is a libertarian, so I thought it would he interesting to talk to them about the Obama administration’s aggressive efforts to promote clean energy and create green jobs. We discussed the U.S. Department of Energy’s recent decision to make $8 billion in loans to Ford, Nissan and Tesla “for the development of innovative, advanced vehicle technologies that will create thousands of green jobs while helping reduce the nation’s dangerous dependence on foreign oil.”

Today’s blogpost explains why Steve Fazzari thinks this is a good idea. Tomorrow, we’ll hear from Russ, is pretty sure that it isn’t.

CapeCodSky

Cape Cod sky photographed by Russ Roberts

Ask Steve Fazzari what he thinks about the government loan program for electric and fuel-efficient cars, and he says:

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