Ford’s Green Partnerships with Federal and State Governments

The 2007 Energy Independence and Security Act (EISA) continued the effort to transition interactions between automakers and the government on fuel economy standards from an adversarial relationship to a partnership. The EISA authorized tough standards for new vehicle fuel economy while creating the Section 136 Advanced Technology Vehicle Manufacturing Incentive Program. Section 136 authorized the U.S. Department of Energy (DOE) to make direct loans to eligible applicants for projects that re-equip, expand or establish manufacturing facilities in the U.S. to produce advanced technology vehicles or qualifying components, and also for engineering integration costs associated with such projects. This federal, $25 billion loan program sought to help automakers invest in the future and implement a new fuel economy mandate estimated by the National Highway Traffic Safety Administration to cost $114 billion.

In June 2009, Ford, Nissan and Tesla were the first companies selected to participate in the Section 136 program after each demonstrated that they had top “green” technologies and met a stringent financial viability test required by the loan program. All three manufacturers offered advanced technology that could “move the needle” on better fuel economy and reduce oil imports.

This government-industry partnership should not be confused with emergency taxpayer assistance provided as part of the Troubled Asset Relief Program (TARP). In contrast to TARP, these loans were awarded based on merit and the potential of the programs to deliver significant fuel economy improvements. Also, the borrowers had to be deemed financially viable, and the funds will be fully repaid with interest. Ford’s loan was fully collateralized.

This DOE loan program is an example of how successful government-industry partnerships can work to achieve public policy goals. The DOE provided low-cost loans to help re-tool U.S. manufacturing facilities for the production of fuel-efficient, advanced-technology vehicles that will result in higher fuel economy and lower emissions, while saving consumers money at the pump and reducing our dependence on foreign oil. U.S. taxpayers will make money on these loans as they are repaid.

Ford is investing billions of dollars in advanced technology vehicles in the U.S. over the duration of the approved loan application, and the loans will help Ford achieve its ambitious goals for fuel-efficient vehicles and technologies. Ford expects to receive funding of up to $5.9 billion through these DOE loans. We will use this funding in part to redesign 11 Ford facilities in the U.S. that make more fuel-efficient vehicles, including the Michigan, Louisville, Chicago and Kansas City Assembly Plants.

An outstanding example of how Section 136 partnership funds are being used is the production of the Ford Focus at the Michigan Assembly Plant (MAP). MAP is being transformed from a large SUV factory into a modern, flexible small-car plant that will produce the global Ford Focus. The new Focus will be one of up to 10 unique models to be built from Ford’s new C-car platform, which is expected to generate total sales in all regions of 2 million units annually by 2012. The Focus is also one of four Ford vehicles that achieves more than 40 mpg. We began production of the all-new Focus at MAP in 2011. In addition, we will produce three of our new electrified vehicle offerings at MAP. In 2011, we will begin producing the Focus Electric, and in 2012 we will begin producing our next-generation C-MAX Hybrid and the C-MAX Energi, our first commercially available plug-in hybrid. The C-MAX vehicles are also based on our new C-platform. For more information about MAP please see: Case Study: Michigan Assembly Plant.

The new Focus exceeds Section 136’s Advanced Technology Vehicle requirements by combining key technologies to achieve class-leading fuel economy, including: an advanced combustion engine, six-speed transmission, deceleration fuel shut-off, electric power-assisted steering, improved aerodynamics and lightweight materials.

Ford is investing approximately $550 million to introduce the North American market to Ford’s global C-platform, which underpins the Focus and C-MAX vehicles. This investment will support more than 4,000 high-tech manufacturing and engineering jobs, not to mention more than 10,000 supplier jobs and 175,000 dealership positions.

In 2010 – and also with the support of DOE’s Section 136 loan funds – we invested $400 million in our Chicago Assembly Plant to ready it for production of the all-new 2011 Ford Explorer. The 2011 Explorer has best-in-class fuel economy for its segment and offers up to 30 percent better fuel economy than the previous Explorer model. It will offer our 2.0L I-4 EcoBoost™ engine, which delivers superior power and fuel economy. This redesign includes investment in advanced quality control and flexible manufacturing systems, and also resulted in Ford adding 1,200 new jobs at the plant. The plant will also continue production of the Ford Taurus and Lincoln MKS sedans. Our reinvestment in and redesign of the Chicago Assembly Plant to produce more fuel-efficient vehicles is especially symbolic, as this is Ford’s oldest assembly plant still in operation in North America. It formerly produced the Ford Model T and Model A vehicles and produced military vehicles during World War II.

We are also investing $600 million to transform our Louisville Assembly Plant into a state-of-the-art facility, which will be our most-flexible high-volume plant in the world. When this plant reopens in 2011, it will produce our next-generation Ford Escape. This investment will result in 1,800 incremental jobs.

Finally, the DOE partnership is helping to fund our $400 million investment in our Kansas City Assembly Plant, to ready the plant for production of a new vehicle, yet to be announced. This plant previously built the Ford Escape, which will shift production to the Louisville Assembly Plant. The $400 million investment will pay for installing a new body shop, new tooling and other upgrades. The Kansas City plant will continue to produce the Ford F-150 on a separate production line.

Ford’s sustainability commitments have received state government support as well. Working in close partnership with the state of Michigan, Ford received incentives and tax credits totaling $188 million to help in the continuous transformation of MAP. In addition to building the next-generation hybrid in Michigan, these incentives enabled Ford to bring advanced lithium-ion battery system design, development and assembly in-house.

Ford also received a $2 million grant from the state of Michigan to install a large, stationary battery-based energy storage facility with 750 kw capacity and 2 MWh of storage. This facility supports the state’s “smart-grid” development initiatives as well as Ford’s efforts to develop battery technology and secondary uses for vehicle batteries. As part of this facility, Ford is demonstrating the possibility for using vehicle batteries as stationary power storage devices after their useful life as vehicle power sources is over. Ford is participating in this project in partnership with DTE Energy, a Michigan-based energy provider. DTE Energy has installed a 500 kw solar photovoltaic (PV) electricity generation system at the demonstration facility, which will produce some of the energy to be stored in Ford’s stationary battery storage facility. It is the largest PV array in Michigan. The solar PV system was funded by DTE Energy to support Ford’s sustainability efforts and to help the state of Michigan meet its renewable energy production requirements. As part of this project, Ford developed 10 electric vehicle charging stations, which demonstrate advanced battery charging technologies and associated integration with renewable energy and other smart-grid advances.