I have been based back in the Americas for fifteen months. For the previous couple years I had been driving Ford’s best-selling vehicle in India –a vehicle with the three letters Eco in its name. This was the company that built the cars I grew up in, but had long since stopped believing in. That “Eco” car got me starting to believe again.
Then the election of 2016 happened. Holding aside all its other dangers, the election result has elevated ecological danger to perhaps its greatest level in my lifetime. A government elected on the slippery Make America Great Again slogan has given cover to companies seeing profit in rollbacks of erstwhile impressive ecological commitments. And the slope down which we all are now sliding seems to be getting steeper. An op-ed by Jamie Lincoln Kitman, the New York bureau chief for Automobile Magazine, illuminates the slip and the slope:
Why Is a ‘Green’ Car Company Pivoting Back to S.U.V.s?
Two years ago, the Ford Motor Company boasted about having been named Interbrand’s Best Global Green Brand and said it was committed to working to meet stricter fuel economy standards. Last week, after lobbying with the rest of the industry to strike down those standards, Ford announced that it would largely abandon the American passenger car market in favor of building more trucks, crossovers and S.U.V.s.
Ford’s announcement marks a significant turning point for the American auto industry. The only heritage United States carmaker that didn’t go bankrupt in the Great Recession of 2008, it had become one of its greenest. But its decade’s worth of investment in developing more fuel-efficient cars is now taking a back seat to profit.
To be sure, today’s crossovers and S.U.V.s are safer, cleaner and more fuel-efficient than their predecessors. But they’re still no real match for passenger cars — sedans, hatchbacks and wagons — when it comes to fuel economy and reduced emissions. High-riding S.U.V.s resist the wind more, which decreases economy (and hurts handling), as does the additional weight of these big-tired behemoths.
Ford received a $5.9 billion loan from the Department of Energy in 2009 to build more fuel-efficient vehicles. And indeed, it developed several internal combustion engines with notably reduced thirst for gasoline. Within a few years, it had a fine full line of passenger cars. The company was well positioned for a greener future. But something changed.
Automakers have spent billions in the past decade to improve gas mileage, and while Ford will add more hybrid and pure electric vehicles to the market, it now plans to pack pounds back on. “By 2020, almost 90 percent of the Ford portfolio in North America will be trucks, utilities and commercial vehicles,” Ford announced. It plans to keep in production the relatively low-volume Mustang, a sporty car that sells for higher prices than ordinary sedans, and a forthcoming rugged variation on its Focus hatchback.
So what changed? The return of cheap gas, for one thing. It makes larger, less fuel-efficient vehicles affordable again to many consumers. American carmakers spent the years around their great bailout professing their ardor for a new generation of fuel-efficient vehicles, but in the end they were only too happy to steer people back into S.U.V.s, which are more profitable.
Call it the S.U.V. Profit Paradigm: Added height elevates the price people are prepared to pay for what is essentially the same vehicle. S.U.V.s and crossovers sell at higher prices than cars of equivalent size, but they cost little, if anything, more to build.
The unwillingness of Congress to tax gasoline more heavily did not help. Nor did the readiness of the Obama administration to accommodate so much of Detroit’s pro-S.U.V. agenda in its regulations. Though they did raise federal mileage standards, the rule makers rewarded companies that built bigger vehicles by setting standards matched to vehicle size, with large cars allowed to burn more gas and pollute more. And now the Trump administration is moving to reduce even those standards.
Even in times of robust, S.U.V.-fueled profit, carmakers have not seen their share prices rise much, especially compared with the tech companies that may, in the era of self-driving cars, become their competitors. Last October, Ford proclaimed it would cut its future spending by $14 billion. Its stock did nothing. Last week, it announced it would trim an additional $11 billion. “We’re going to feed the healthy parts of our business,” Ford’s chief executive, Jim Hackett, told analysts, “and deal decisively with the parts that destroy value.”…