Auto electrification needs government aid: Ford

DETROIT, MICHIGAN - The electrification of the car industry will need assistance from government energy policy to spur demand, though the method remains an open question, Ford Motor Co Executive Chairman Bill Ford said.

Speaking to reporters at an event in conjunction with the North American International Auto Show, Ford also said the demand for vehicles such as an electric small car Ford Motor has plans to produce in a partnership with Magna International, is also uncertain.

"I do think we are going to need some help in the marketplace with the new administration in terms of an energy policy that would drive demand for these vehicles," Ford said of U.S. President-elect Barack Obama's administration.

Energy policy could take the form of a gas tax, purchase incentives, a program for scrapping older vehicles to spur demand for replacement cars, or some combination, he said.

"With gasoline still below $2 per gallon in some parts of the country, I think we are going to need some help."

Ford burned through $7.7 billion of cash during the third quarter and has told lawmakers that it would like access to a line of credit of $9 billion as insurance against a worsening in the economy. It does not want to tap the line.

The automaker has been in a turnaround plan for several years that includes white and blue collar job cuts, plant closings and asset sales including brands Aston Martin, Jaguar and Land Rover from its former premier auto group.

"Despite some of the economic issues we have gone through the last two years, we have kept our R&D spending alive and we have kept it in a myriad of alternate technologies," he said.

The development of lighter and more powerful batteries has been a key stumbling block for developing electric vehicles, plug-in hybrids and other vehicles, something on which Ford has seen progress in recent years.

"We don't know what the volumes are going to be, we have no idea what the demand is going to be, but it is a road that makes a lot of sense," he said of the electrification program.

One risk to Ford's electrification strategy is the threat that gas prices stay low and sap consumer demand for electric vehicles. U.S. gas prices peaked at a national average above $4 per gallon in the summer, but are half that now.

"We are betting long-term that fuel becomes dear and that energy independence becomes important not only to Americans, but people around the world," Ford said. "The bigger risk is to do nothing."

Ford Motor announced plans to deliver electrified vehicles to the market by 2012, including a small full battery electric car in 2011 that will use the Focus compact car platform and a drivetrain from Magna.

The automaker also plans to have a full battery electric commercial van in 2010 and next generation hybrid vehicles, including a plug-in version, by 2012.

"If we go ahead and launch these vehicles and there is no infrastructure to charge them, the utilities aren't on board and there isn't incentive for the customers... we could launch these vehicles into dead space," Ford said.

"But I don't believe that is going to happen, because I believe that the new administration and the new Congress are going to make this a high priority," he added.