In these days of nearly nonexistent profits for every one of Detroit's Big Three automakers, R&D funds must be allocated very carefully. In contrast, Japanese manufacturers such as Toyota and Honda have been earning profits on a yearly basis. Not long ago, a mild spat arose regarding whether or not the Japanese government helped fund the development of Toyota's Hybrid Synergy Drive. Even if they didn't do it in the past, Ford's President of the Americas Mark Fields indicated that they are doing it now at a conference held today in Washington, D.C. by Brookings and Google.org titled Plug-In Electric Vehicles 2008: What Role for Washington?

Fields called on the U.S. government to step up to the plate, mentioning tax breaks and incentives as one option to aid consumers who'd like to purchase these ultimately expensive vehicles one day. On the manufacturing side, Fields suggests that plug-in hybrids should be a "national priority", with Washington needing to allocate funds for research and development. Another area singled out is a domestic supply of batteries, since most of the units used in today's hybrids are being manufactured overseas.

It should be noted that General Motors already has a head start towards PHEVs with its upcoming Chevy Volt. As far as we're aware, the development costs for this vehicle and its batteries has been moving forward without direct assistance from the government. Feel free to read Field's entire speech after the break.

[Source: Ford]


SPEECH: MARK FIELDS AT PLUG-IN ELECTRIC VEHICLE CONFERENCE; JUNE 11, 2008

Good afternoon. It's a pleasure to be with you today as we look at the business case for a technology that holds great promise and poses many questions.

Plug-in hybrids offer a compelling transportation solution – one that will only achieve its full potential through a shared commitment to innovation and collaboration.

Pursuing this and other advanced technologies requires us to collectively address the toughest challenges we face today: our economy, our environment and our security. These are significant concerns for every sector represented here today.

The auto industry and our customers have been hit hard by rising commodity prices. Record-high fuel prices and continued difficulties in the housing market have further accelerated the shift away from large pickups and SUVs to small and mid-size cars and crossovers. Concerns over climate change and energy security also must be addressed.

Responding to this daunting range of challenges will require all sectors of the economy and society to join forces and work toward common goals. As we continue to push the frontiers of vehicle technology, we must strive for solutions that are sustainable in the truest sense – socially, environmentally and economically.

At Ford, we're working to be part of the answer. As we accelerate the development of products and technologies people want and value, "driving green" is at the heart of our business and our plan to achieve profitable growth.

We're committed to finding technology solutions that will deliver meaningful fuel economy improvements – reducing CO2 emissions and petroleum consumption, and allowing our customers to spend less at the gas pump. We allocate more than two-thirds of our $7 billion annual Research & Development budget to that challenge alone.

There's no silver bullet solution, so we're pursuing multiple technology paths – recognizing that commercial viability is an essential component for success. To affect change and reach beyond the experimental realm, innovation must be sustainable for the company as well as affordable and accessible for our customers – a democratization of technology, which is part of our heritage.

Ford's comprehensive sustainability strategy involves developing near-, mid- and long-term solutions to benefit millions of customers – without compromising their expectations for quality, safety, fuel economy and performance. We are committed to delivering technology that will be affordable to our customers and can make a real difference by being applied to millions of vehicles.

The cornerstone of our near-term sustainability plan is EcoBoost. This high-volume turbo-charged, direct-injection engine lineup will allow us to offer customers engines that deliver up to 20 percent fuel economy savings, up to 15 percent CO2 reductions and a boost in driving enjoyment.

EcoBoost delivers the performance of a V8 with the fuel economy of a V6 – or the performance of a V6 with the fuel economy of an I-4 engine. The new Lincoln MKS luxury sedan will be the first with this new engine next year, followed quickly by the new Ford Flex and F-150. It will migrate across the lineup so that by 2013, we'll build up to half a million vehicles annually with EcoBoost.

It's affordable technology with a high-volume impact. Importantly, for our customers, these engines will pay for themselves years faster than small diesels and full hybrids.

Our plan includes literally hundreds of product actions as we strive to squeeze everything we can out of improvements in vehicle aerodynamics, engine efficiency, and lightweight materials – all geared to improving what customers are demanding: increased fuel efficiency.

We're expanding the use of fuel-saving 6-speed transmissions. Late this year, we're launching two new hybrid sedans – the Ford Fusion and Mercury Milan – expanding our full-hybrid fleet to five vehicles. And we're planning clean diesels for the F-150 and our large SUVs.

But other technologies will be necessary to reach the long-term goals of CO2 reduction and energy security. Among the most exciting are the focus of today's discussion: vehicles that offset carbon-intensive petroleum use, operating on domestically sourced electricity that, with the proper support, could be made accessible to customers nationwide.

Last July, we formed a unique new partnership with Southern California Edison – the first time our two industries have formally committed to work together to accelerate the commercialization of plug-in hybrids. After all, we now share a common customer in an all-new way. One of the first things we have learned is that our industries know very little about each other, and developing a common language was one of our first goals.

We have now jumped into a number of specifics, including things like: identifying all of the stakeholders required for success; PHEV total life-cycle analysis; helping develop appropriate electricity rate proposals; and myriad other technical standards required to realize the full potential of PHEVs.

Through our partnership, we're beginning to understand the very complex issues at hand – regional and national – and are working to lead our collective industries forward in developing solutions to the technical as well as economic challenges.

SCE is one of our country's largest utilities with more than 25 years experience testing electric and plug-in electric vehicle batteries. We're working together to figure out how best to accelerate the commercialization of plug-in hybrids and reshape our respective businesses for the future.

Earlier this year, the partnership was expanded to include the Electric Power Research Institute. EPRI brings tremendous experience and expertise in electric transport and also provides a national perspective – to ensure that our program addresses any regional differences related to plug-ins and the electric grid on a nationwide basis.

To advance this technology, we're already road-testing the first of our 20-vehicle Ford Escape Plug-in electric hybrid vehicles. Imagine getting up to 120 miles per gallon for the first 30 miles following a full charge. Those are the kind of numbers that our Escape Plug-in Hybrid can achieve.

Its reduced fuel consumption comes from a 10 kW-hr high capacity, lithium-ion battery that can be charged from a standard 120V electrical outlet and then discharged during driving. It's recharged overnight from a standard home outlet. Based on typical American driving, a fleet of vehicles such as our Escape Plug-in Hybrid have the potential of displacing 60 percent of fuel consumption nationally.

And range restrictions don't pose a problem. When the battery charge has been partially depleted, the vehicle continues to operate as a standard hybrid electric vehicle – or what's known as a blended Plug-in HEV.

A recent addition to our demonstration fleet is a plug-in hybrid electric vehicle that is capable of operating on E85. As a leader in both hybrid and flexible fuel technology, Ford is well-positioned to bring the two together in a plug-in vehicle to demonstrate the potential for CO2 reduction and energy security.

We also have many partners on the stage today. I'm pleased to announce that our partner – Johnson Controls-Saft – will provide the batteries for our 20-unit fleet of Escape Hybrid Plug-ins. Partnerships and collaboration are critical to bringing emerging technologies from the laboratory onto the street.

Plug-ins are not without their challenges. While the basic architecture is similar to our current hybrid electric vehicles, there are engineering challenges. Solutions need to be found for systems that traditionally would rely on a conventional engine – things like emissions control, transaxle lubrication and even cabin features like window defrost and heating.

We've been working on these and other technical hurdles, and we're confident that we have the expertise to properly design a robust plug-in hybrid.

But in order to deliver plug-in hybrids to the mass market, challenges that lie outside of the automotive realm must be addressed. Viable solutions to these issues can only come from partnerships with other sectors of the marketplace.

First, there's the battery. The advancement in lithium-ion technology is what makes plug-in hybrids possible, but the technology is still new for vehicle applications.

Will lithium-ion batteries prove durable – especially when they're subjected to the vibrations and bumps of 150,000 miles of real-world use? Will they meet customer expectations in the extremes of a Minnesota winter and an Arizona summer? Will the packaging and controls provide the level of quality and safety that consumers demand, and expect, from our products?

While they are getting closer, battery manufacturers have a ways to go before they can commit to providing batteries that meet OEM safety and durability requirements at a cost and volume necessary to support substantial production – and at a level that would affect national petroleum consumption and carbon dioxide emissions. Will the batteries be able to do all that and be affordable to the average consumer?

It's also important to note most battery supply is currently being developed in Asia. For those looking to plug-ins to answer our energy security concerns, we must ensure a domestic battery supply. Moving from imported oil to imported batteries clearly would not address this growing concern.

The other major pre-requisite for commercial viability is a robust recharging infrastructure. Recharging is as simple as plugging in the vehicle – not much different from any other appliance. But the infrastructure to provide that plug needs a lot of work.

Among the factors to consider: Access. Nearly everyone has electricity, but how many potential consumers have garages? Access to overnight charging isn't readily available for most people who live in apartments or condos. Or for that matter, for suburban families with teenagers, or simply too many outdoor "toys" stored in the garage.

One-hundred-plus years of experience with gasoline has ensured a nationwide infrastructure that allows you to drive cross country without worrying about where to get fuel, but a public recharging infrastructure for plug-in hybrids simply does not exist at this time.

Payment. Perhaps the most perplexing issue is: When you're not at home, how do you pay for the electricity you use to recharge your vehicle, or for that matter, how do you know how much that electricity will cost? Rates vary from region to region, and soon – from hour to hour.

The utilities. The petroleum industry involves only a handful of participants. But in the U.S., there are literally thousands of utilities which would need to unite in recharging protocols and billing to provide the seamless infrastructure needed for a mass market.

We're working to find the right answers. Through our partnership with Southern California Edison and the Electric Power Research Institute, we're looking at the charging infrastructure, how the vehicle connects to the home and how the vehicle connects to the grid if not charged at home – as well as opportunities to advance the battery market to bring costs down and perhaps provide distributed energy storage to strengthen the grid.

Through this collaboration, we will gain real-world experience with customers throughout the country. That experience and the data we gather will help us do the necessary business analysis to determine the viability of plug-ins.

We would all agree that we want to reduce carbon dioxide emissions and improve energy security. But how do we achieve these goals in a sustainable way – making a business case that provides value to the customer, the utilities, and the manufacturer?

Based on the necessary research and development costs, manufacturing and production investments, the lack of a national refueling infrastructure, and the lack of domestic battery manufacturing, it seems clear that a business case will not evolve, in the near term, without support from Washington.

Government policy can be effective in accelerating commercialization of new technologies. Tax breaks for hybrid technology proved to be an incentive for early adopters of hybrid vehicles leading to greater customer acceptance. In the same manner, incentives for plug-in hybrids will need support if they are to be developed for commercial viability. Domestic battery production must be prioritized.

The Energy Independence and Security Act of 2007 went a long way toward developing research, development and demonstration programs for plug-in vehicles and batteries. We now need to execute this and ensure the programs get the appropriate funding.

Just as the Dept. of Energy recently placed nearly $400 million with various ethanol producers to hasten commercial applications, bold and dramatic incentives are needed to accelerate the commercial development of high-energy power batteries in the U.S. It's a critical factor that requires support – and there are others that without subsidies simply cannot advance.

Plug-ins hold the potential to dramatically reduce CO2 emissions, help address energy security issues and contribute to economic stability and employment.

Setting the stage now is critical to move beyond low-volume manufacturing cost penalties and advance to full-scale production – with cost efficiencies making the benefits of plug-in hybrids accessible to customers nationwide.

In order for us to succeed, we must make this a national priority. We are doing our part to transform the industry and invest in new technologies. However, in a global environment, a substantial government partnership is required.

The governments of Japan, China, Korea, and India are significantly funding the research development and deployment of plug-in hybrid vehicle technologies. This is a race that we must win. We should not trade one foreign energy dependency for another.

For us, the energy future vision for success is clear: We must achieve the most economically efficient carbon reductions and fuel economy improvements possible. And, whatever we do, our actions must be affordable for our customers and our business. We can't do it alone.

Government should be a key partner in promoting American manufacturing and the fight against global warming – and for energy security. We won't be successful unless industries and governments are all working together.

Key actions the government can take include: creating a new industry/government partnership to aggressively advance battery research, development and commercialization; injecting significant federal funds into advanced plug-in vehicle technologies and into facility retooling to produce these vehicles; enacting comprehensive climate change legislation; requiring regulatory policies that stimulate innovation, rather than just imposing new mandates; and, enacting one national standard for fuel economy – rather than allowing a patchwork of state and federal regulations

We will only be successful if we work together toward our shared goals. Industry. Utilities. Battery suppliers. The government. We all play a critically important role in driving the development of successful plug-in hybrids that people really want.

Today, we're at an important juncture. Continued government investment, incentives for industry to continue pushing on research and development of this emerging technology and rewards for customers who incorporate it into their lives are the keys to real and lasting change – and a future of greater energy independence in which we can all thrive.

Thank you.