BILL FORD
Chip East  /  Reuters
Ford CEO Bill Ford Jr. speaks to reporters at the New York auto show Wednesday. Behind him is Ford's hybrid Escape SUV.
msnbc.com staff and news service reports
updated 2/28/2005 1:22:02 PM ET 2005-02-28T18:22:02

How do you get millions of Americans to buy gasoline-electric hybrids? Shortly after unveiling his company's plans for a second hybrid SUV, Ford Motor CEO Bill Ford Jr. suggested this: a combination of a new gas tax and tax incentives for consumers.

Ford said he has supported a gas tax of 50 cents a gallon, but he preferred tax breaks for consumers who buy cars with new fuel-saving technology such as hybrids, which are powered by gas engines and batteries to boost fuel economy.

“Even going back four or five years I used to say that I’d support a 50 cent gas tax,” Ford said at the New York auto show on Wednesday. ”I think that a combination of gas taxes and incentives would also be something we could support. But I don’t know how high.”

Ford said he realized a gas tax was difficult politically and noted that the energy bill debated in the U.S. Congress included a $2,000 tax credit for more fuel-efficient vehicles.A deduction now exists for hybrids — $1,500 for 2004 — but is being phased out over the next few years.

Current gasoline-electric hybrid vehicles cost on average $4,000 more than a comparable gasoline vehicle, according to J.D. Power and Associates, the global marketing information services firm. At that cost, it would take consumers years for the savings from better gas mileage to offset the higher price.

Some other industry officials, including General Motors Corp. Vice Chairman Bob Lutz, have also voiced support for higher gas taxes and sales incentives.

Ford: Industry pulled apart
Unlike in Europe, where high gasoline prices and government policies drive consumers to fuel-efficient models, the relatively low gasoline prices in the United States have contributed to the popularity of SUVs.

That puts the current U.S. fuel regulations, which require the vehicles sold by automakers to achieve a certain average fuel efficiency, into conflict with consumer demands, Ford said.

Despite regulations, the average fuel economy of vehicles on U.S. roads has declined over the past two decades with the growth of sport utility vehicle sales.

“Under the (U.S.) system, we’re being pulled one way by the customer, and the other way by regulation, and that to me is unsustainable in the long run,” Ford said. “Anything that can help align a customer’s pocketbook interest with their purchase intention” would help promote greater fuel efficiency, he said.

“I’d like to get either federal or state and local help ... and I think it’s the responsible thing to do,” he added. “If the federal government really wants to encourage this kind of behavior — and they should — then that’s a way they can clearly help.”

Ford Mariner SUV hybrid
Ford earlier announced plans for a second gas-electric hybrid SUV, a move welcomed by environmentalists who nonetheless said Ford and its American rivals could do much more to clean up the air and reduce America's dependence on foreign oil.

2005 MERCURY MARINER
Ford Motor Co. via AP
Ford's 2005 Mercury Mariner, a new gasoline SUV, will have a gas-electric version in 2007, Ford announced.

Ford announced at the New York International Auto Show that it will build a Mercury Mariner hybrid SUV for the 2007 model year. The Mariner will join the Ford Escape SUV and a future midsize sedan in the automaker’s hybrid program.

Ford unveiled the Escape hybrid last year at the New York show and plans to begin selling the vehicle in late summer. Ford has said the hybrid system in the front-wheel-drive Escape allows the vehicle to get 35 to 40 miles per gallon in city driving, compared with 20 miles per gallon in a 2005 Escape with a V6 engine.

A similar hybrid system will be available in an upcoming Ford midsize sedan, also introduced at last year’s New York show. Ford had planned to call the model Futura, but a federal court has ruled that the Pep Boys auto parts retail chain owns the rights to that name.

Ford has not announced a definitive launch date for the hybrid version of the sedan. Neither pricing nor mileage details were released for either the sedan or the Mariner.

Environmentalists' view
Dan Becker of the Sierra Club said the Escape hybrid proves automakers can make big vehicles with better gas mileage. The Sierra Club had been critical of Ford since the automaker last year backed away from a promise to improve fuel efficiency in all of its SUVs by 25 percent by mid-decade.

“If they can make an SUV get 40 miles to the gallon, they can make all their vehicles much cleaner and cut our oil dependence, and we encourage them to do so,” Becker said Tuesday.

To press that point, the Sierra Club and other activist groups plan to demonstrate Saturday outside the New York Auto Show, where the industry is displaying many of its new models.

Honda hybridJapanese automakers Toyota and Honda currently are the only ones selling hybrids, which draw power from two different energy sources -- a gasoline engine combined with an electric motor.

Toyota, Japan’s biggest automaker, was the first in the world to commercially mass produce and sell hybrid cars with the Prius in 1997. It intends to sell a hybrid Highlander SUV next year and its luxury Lexus division plans to sell a hybrid SUV by the end of 2004.

Honda will offer its third hybrid late this year when it offers the technology on a version of its popular Accord sedan. It already sells the Insight hybrid and a hybrid Civic.

Escape details
Ford has touted the Escape hybrid as the world’s first “no-compromise SUV,” combining the fuel economy benefits of a “full” hybrid along with the cargo capacity and on- and off-road capabilities of the traditional Escape.

ESCAPE HYBRID
Ford Motor Co.
This illustration shows the Escape's gasoline engine at front and connected to a battery pack at rear and below the cargo area.
Pricing for the Escape hybrid has not been released.

Ford also is expected to announce in New York that Mary Ann Wright, chief engineer of the Escape hybrid, will lead a new group as director of Ford’s sustainable mobility technologies and hybrid vehicle programs. The group will be responsible for all of Ford’s fuel-cell and hybrid vehicles.

GM, for its part, said late last year it will focus its most advanced hybrid technology on its largest, least-fuel-efficient models first. The automaker said it also had scrapped plans to place a full-hybrid engine in a future compact sport utility vehicle.

The first of the automaker’s advanced hybrids — those that can achieve a fuel-economy improvement of up to 35 percent, compared to one-third that amount with mild systems — is scheduled to reach showrooms in 2007.

Demand, supply and luxury
Toyota and Honda have reported strong demand for the vehicles. Last week, Toyota said it would raise the price of its Prius hybrid sedan by $300 or 1.5 percent, after increasing its targeted annual U.S. sales volume to 47,000 last December from its previous target of 36,000.

Hybrids, however, remain only a small fraction of overall U.S. sales, which are expected to total 16.7 million vehicles this year.

Still, demand for more fuel-efficient vehicles such as hybrids could grow if gas prices continue to steadily climb, J.D. Power and Associates, a California-based research group, said following a study of 7,126 consumers released this week.

Toyota's Lexus RX 400h will usher in a new era of hybrids that offer a racy ride without the guilt. The RX 400h will accelerate from zero to 60 miles per hour in 7.5 seconds, about half a second faster than the RX 330 SUV, but will get more than six miles per gallon better fuel economy.

“When you talk to SUV buyers, the number one dissatisfaction is fuel economy,” said Dennis Clements, a Lexus vice president. “So I think that (RX 400h) will resonate. The luxury SUV business continues to grow, quite dramatically.” 

Looking to hydrogen, fuel cells
Even as the popularity of hybrids grow, automakers have said gas-electric engines are a transitional technology that will eventually be replaced by hydrogen-powered fuel cells that emit exhaust containing nothing more toxic than pure water.

However, experts say the nation is at least a decade or two away from that, as the infrastructure needed to fuel up with hydrogen is virtually nonexistent.

Ford, like others, is working on long-term research related to hydrogen-powered vehicles. The work includes a Ford Focus with a hydrogen internal combustion engine and a hydrogen hybrid research vehicle.

The Associated Press and Reuters contributed to this report.

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