As U.S. automakers begin to recover by focusing on smaller, greener fleets, will they continue to need financial backing from the federal government? During today's OnPoint, Nancy Gioia, director of global electrification at Ford Motor Company, discusses the hurdles to expanding electric vehicle fleets in the United States. She also explains how Ford is addressing consumer and market challenges for green vehicles.
Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. Joining me today is Nancy Gioia, Ford Motor Company's director of global electrification. Nancy, nice to see you again, thanks for coming on the show.
Nancy Gioia: Great seeing you, thanks for having me.
Monica Trauzzi: Nancy, the U.S. auto industry has been through many ups and downs over the last 18 months. As it begins to recover, the Big Three are focusing on greening their vehicle fleets. Your job focuses specifically on electrification. What percentage of Ford's business plan is electrification versus just making the vehicles, the standard vehicles more fuel efficient?
Nancy Gioia: Well, you know, that's a great question because this is part of what we've been looking at and for years now we've been working on we call our sustainability blueprint. And it's really looking at our contribution for climate change, making sure our products and the fuels they use are consistent with getting to that target of 450 part per million by 2050 number. Our customers, they want better fuel economy and more energy efficiency and access to that and then affordable, fun-to-drive product. So, as we've looked at that, we've put together today electrified product, we've doubled our hybrid volume last year with the addition of our Fusion Milan and, you know, we make over 50,000 a year. We're the second-largest producer of full hybrids in the world and that means a vehicle that can actually propel itself electrically down the road, as well as launch in electric mode as well. Now, so that's today, late this year we're adding our transit connect battery electric vehicle, we have a Focus battery electric coming and in 2012 we have our next-generation hybrid system and a plug-in hybrid coming. Now, that's all adding applications in volume and where we're targeted is by 2020 we expect in North America our fleet to be between 10 to 25 percent electrified. And I spoke about all of those, because when we say electrified we include hybrids, plug-in hybrids, and battery electrics.
Monica Trauzzi: In the short term, why has Ford decided to focus on eco-boost technology to improve fuel economy when that hasn't really shown to meaningfully boost efficiency of vehicles? Are there other options that your company could focus on right now?
Nancy Gioia: Well, you know, I mean, boy, eco-boost, 15 to 20 percent fuel-efficiency improvement, we gas-turbo direct injection, we downsize the engine, we combine it with efficient transmissions, along with other efficiencies, electronic power assist steering, other energy improvements on the vehicle and what we're finding is 20 percent fuel-efficiency improvement. You can replace a V-8 with a V-6 or an I-4 engine from a V-6 and this is giving performance, fun to drive, real-world fuel efficiency utilizing all of the things that the vehicle has. So, it's affordability of environmentally compatible product for the masses. You know, the one thing I'll have to say about Ford is our strategy is very pragmatic and it kind of goes back to our original roots, affordable transportation for the masses that meets the customer needs. And so what we're looking at is eco-boost, very affordable 20 percent fuel efficiency, up to 20 percent. We have our hybrids. We're adding the battery electrics, our plug-in hybrids. We have biofuels, both biodiesel in Europe as well as ethanol-based here and all of those provide, yeah, it reduces oil consumption, but it also provides affordable choices that still allow customers to have their towing capability on their trucks if they need that for their business or I have a horse trailer. I have an F150 and a Fusion hybrid in my driveway.
Monica Trauzzi: But electric vehicles ...
Nancy Gioia: So, I mean, we've got to get that balance right.
Monica Trauzzi: Electric vehicles, no matter how you look at it, are more expensive than your traditional vehicles. How do you get the consumer to not only change their behavior, but also sort of become okay with the fact that they might be spending five or $10,000 more on a vehicle?
Nancy Gioia: Well, you know for example, our hybrids, our hybrid Fusion is about 3500 more than the base Fusion, equipped similarly. So, what we look at is, and this is true of our customers, they want a reasonable payback period. Depending on how they drive, how many miles, what kind of miles they put on, we have many customers who see that payback period in a reasonable amount of time. For other customers, they're saying, nope, this doesn't work for me and, oh, by the way, I have to carry seven passengers or I have loads to carry, things like that, so we have to have a choice that works for them as well. And, I think, as we look at the hybrids, the battery electrics, the plug-ins, eco-boost technologies, plus fuel diversity, this is our pragmatic solution. There is no one silver bullet. We see the need to develop the technologies and lead in that development and then bring affordable transportation to the masses that meets all their needs, delivers their functionality and their connectivity in a safe and secure way.
Monica Trauzzi: Are there specific things that you're doing to sort of steer consumers in the direction of buying the sort of greener vehicles that you offer at this time?
Nancy Gioia: Well, you know, we look very hard to make sure that the vehicles deliver best-in-segment performance, so our hybrids, our Escape hybrid for example, most fuel-efficient SUV on the planet, literally. It has fantastic connectivity. It's a full SUV, has all the functionality that you would want. So, you have class, segment leading fuel efficiency plus everything else. Same with our Fusion, you know, externally reported, the Fusion quality, the durability, the reliability, the safety performance, fun to drive, hybrid is connected, 41 miles per gallon city, 36 highway, beats the closest competition by 8 miles per gallon city. So, it's not just by a little, it's by a lot. Fuel economy, we want to be a reason to buy Ford and, as you look at all of our product coming out, in every segment we compete our product will have the best fuel economy. So, we're putting it out there, plus it's still a vehicle, it still meets all the functional needs. It's fun, engaging, and that's what is going to set Ford apart.
Monica Trauzzi: The Big Three were criticized for a long time for not getting it, for not making smaller vehicles, for not making vehicles fuel efficient. Do you believe your company and the other two Detroit automakers have turned a corner and are focusing 100 percent on more fuel-efficient vehicles?
Nancy Gioia: Well, I can only speak for Ford and what I can say is we have our sustainability roadmap, we're very customer focused, and I think the criticism, it was fair at one point. But we're very clearly focused on the value for the customers, fuel efficiency, environmental compatibility, connectivity, the safety, the security, the reliability of our product. And, as you look at what we have been working on for the last several years, I think the proof is in the product and the customer's response to it.
Monica Trauzzi: The two big challenges we hear about from automakers looking to expand their electric vehicle fleets are the high cost of lithium-ion batteries and the lack of common standards. Can these be resolved quickly? How confident are you that they can be resolved?
Nancy Gioia: Well, you know, again, this is why our portfolio looks at hybrids, plug-in hybrids, and full-battery electrics. There's no question that the new technologies like lithium-ion battery technology, especially for battery-electric vehicles, carry a very high cost. And what we're working on is we also will have our hybrids moving to lithium ion and our hybrids we expect to be the brunt of our volume between now and 2020. Up to 75 percent of our electrified lineup we expect to be hybrids and then about 20 percent plug-ins, depending on that cost and infrastructure availability. And then the battery electrics, probably still focused on fleets or customers who have driving needs that really match what a battery-electric vehicle is good at, so that's a lot of short trips, access to the infrastructure and recharging. So, what we're doing is we're working hand in hand with the supply base, with the researchers we're providing the feedback on what we need to batteries to do. So it's not only the cost of the battery, there's some functional improvement for temperature and life that we need to get on that and we're working closely to help our suppliers develop chemistries capable. In the meantime, between, for example our strategy of affordability, you know, just peel it down for just a second, we have electrified, and that's the battery electric, the plug-in, and the hybrid, our global C platform. This is a platform that we make over 2 million units a year on, so when we produce, and that's an Escape, a transit connect van, the Focus, the C-Max in Europe, all of these products come off of that by electrifying a platform and integrating that into the same facility that makes efficient petrol or diesel vehicles with electrified, that's helping that cost and affordability. So, it's not only the lithium-ion costs, it's all of the electrified components working to have creative solutions for scalability and then the features and the functionality.
Monica Trauzzi: OK, we're going to have to end it right there. I thank you for coming on the show. Nice seeing you again.
Nancy Gioia: Thank you.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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