Ford Motor Company’s most expensive sports car is the Mustang Shelby GT500 convertible, a 500-horsepower rocket sled that retails for about $55,000. Compare that to the $97,000 for the base model hybrid-electric Karma, the high-performance sports car made by upstart Fisker Automotive.
Those two price points should have tipped off the Obama administration as to why providing a $529 million loan guarantee to Fisker would end up a public-relations blunder. But in 2009, the administration went ahead with the deal. “We’re making a bet on the future, we’re making a bet on the American people, we’re making a bet on the market, we’re making a bet on innovation,” said Vice President Joe Biden.
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The Obama administration made a bet, but which company is innovating in ways that will matter to more Americans, Ford or Fisker?
That question is important because both companies have benefited from taxpayer largesse. Ford didn’t get a bailout like GM and Chrysler, but it has received favorable treatment from the federal government, including, among other things, a $250 million loan guarantee to help boost exports and $5.9 billion in Department of Energy loans for the retooling of some of its U.S. factories. Those loans appear to be paying off. Last month, Ford announced that it plans to hire 12,000 new workers in the U.S. by 2015.
Fisker also got a loan guarantee, but — as ABC News reported last month — it won’t be building its cars in the U.S. Instead, it will be assembling its cars in Finland because the company said “it could not find a facility in the United States capable of doing the work.” California-based Fisker says it has 3,000 pre-orders for the Karma and that it will begin producing about 1,200 cars per month at the site in Finland.
But as Fisker begins producing a relative handful of vehicles, each of which cost more than a Mercedes-Benz S550 (sticker price: $94,500), Ford CEO Alan Mulally is writing one of the most remarkable comeback stories in U.S. industrial history. Mulally took over the top job at Ford in 2006 and mortgaged it to the hilt, borrowing $23.4 billion. He then launched a company-wide overhaul, streamlining processes and reducing product lines. The results: Over the past two years, the company has earned about $9.3 billion, after losing more than $30 billion from 2006 through 2008, and it’s rapidly paying down its debt. Last month, it announced third-quarter profits of about $1.6 billion on revenue growth of 14 percent.
Ford’s success is due, in part, to federal help. No doubt about it. But the key point is that Ford is producing innovative products that lots of customers can afford. It recently unveiled a turbocharged three-cylinder, one-liter engine for the Focus that can produce 118 horsepower while still getting more than 40 miles per gallon on the highway. Put another way, Ford’s new engine will produce about 47 percent more power per liter of displacement than the engine now being used in the Focus.
Better still, Ford’s vehicles are made for the mass market, not for drivers who are accustomed to Benzes and Beemers. In October, Ford sold 167,500 cars in the U.S. Thus, in one month, Ford is capable of selling about 140 times as many cars as Fisker says it will be capable of producing at its location in Finland. And it’s not at all clear that Fisker will ever move beyond being a business that caters only to the carriage trade.
The obvious fix to the Fisker fiasco is to get the federal government completely out of the auto business. The world’s carmakers — and that surely includes Ford — have plenty of capital and production capacity, along with myriad technologies, that they can bring to the market if there’s demand. And that includes electric cars. Just a few days ago, Ford announced that it will begin selling an all-electric version of the Focus in 2012 for about $40,000. It’s doubtful that Ford will find a sizable market for the electric version of the Focus, particularly when you consider that the gasoline-engine version of that same car sells for $17,000.
That said, it’s abundantly clear that American taxpayers don’t need to be underwriting the production of the Karma, a vehicle that has — I kid you not — a trim package known as EcoChic.
Beside's the Focus, Ford also builds the Fusion Hybrid which deserves much more attention than Ford gives it. We've had ours since last summer, and over the course of 16k miles, our average fuel economy is 37mpg. Astonishing for a mid-sized car with plenty of room and a functional trunk. The kicker, we only paid $28k new, and it is fully loaded.
Yet another example of the government trying to pick winners and losers, and picking the loser with our tax dollars.
Author ignores fact that Fisker bought auto plant in Delaware and will be making the new model Fisker there, has created hundreds of jobs there, etc. This appears to be a political piece ignoring facts that don't play to his argument and is therefore counterproductive.
Author ignores fact that Fisker bought auto plant in Delaware and will be making the new model Fisker there, has created hundreds of jobs there, etc. This appears to be a political piece ignoring facts that don't play to his argument and is therefore counterproductive.
Author ignores fact that Fisker bought auto plant in Delaware and will be making the new model Fisker there, has created hundreds of jobs there, etc. This appears to be a political piece ignoring facts that don't play to his argument and is therefore counterproductive.
It is not a question of whether a government "bet" happens to work out or not. It is whether "betting" with taxpayer money is Constitutional - it most certainly is not.
It is clear that dependence on foreign oil is a matter of national security so anything that solves that is also a matter of national security, so jump starting that to me is a function of our government.
How about all the money we saved due to price of gas dropping each time alternative energy is focused on? I believe Obama's "gamble" on electric and solar energy paid off in just that. For years we've wanted investments in alternative-to-oil and now we've got a few. Of course some will fail especially when big oil lowers their prices for just that reason.
This shows 120 + 80 = 200 jobs and just getting started. Tesla is another. And both companies new models are half the price of the first models, another fact conveniently ignored by author.
The price of gas has fallen primarily because the administration's policies have prolonged a deep recession and led to repressed demand. Just think how much further gas prices would fall if they would allow supply to increase.
Yet, you can't make the numbers work on electric cars, solar energy and the like to justify these "investments" with our tax money unless you "necessarily make the cost of energy skyrocket", to quote the President.
Further, in addition to being an unconstitutional use of taxpayer funds, as many have pointed out, just what is it that makes this administration believe they are such sage "investors?" I mean, who among them have such experience with track records that would warrant this enthusiasm they have and confidence in the results?
Did that community organizing background also have some form of portfolio management of the earnings of the individuals in those communities? Did the Harvard Law Review have an opinion column on investments or personal finance? Did the President study, say, Securities Analysis at Columbia?
Who among this bunch would even know a "good" investment of taxpayer earnings if it was right there in front of them? Even IF they followed a detailed process for selecting such "investments" they won't share with anybody? Is it mere coincidence that so many of these "investments" also appear to always have a link to a big campaign donor/bundler?
Other than that, and the consistently poor results, there's not much to complain about our earnings being used to fund these ventures, is there?
Norman, I guarantee that Fisker will fail. Why? Because the cost of their cars is too high to generate the volume to make a self-sustaining business. Their business model can't generate the profits to fund R&D for future car models without continued government help. Battery cost, not range, has been the main problem with electric cars for the last 100+ years. Batteries improve, but they continue to trail the internal combustion engine which has also been getting better.
In contrast, Ford has made incremental improvements in the fuel economy of their entire product line including the best-selling F-150 pickup. They are delivering hundreds of thousands of 10% to 15% more efficient mass market cars to average Americans while Fisker may deliver a few thousand government subsidized green luxury cars to the rich.
Are the new models available? Didn't think so. So saying they are half price (from $100k no less), is currently a projection. Much like thier projection that the "new" models would be here already.
In any event, I didn't realize there was pent up demand for $50k hybrids?? Toyota/Lexus finally realized it the other day as they get ready to ax thier $40k hybrid after abissmal sales...
How about all the money we saved due to price of gas dropping each time alternative energy is focused on? I believe Obama's "gamble" on electric and solar energy paid off in just that. For years we've wanted investments in alternative-to-oil and now we've got a few. Of course some will fail especially when big oil lowers their prices for just that reason.
This shows 120 + 80 = 200 jobs and just getting started. Tesla is another. And both companies new models are half the price of the first models, another fact conveniently ignored by author.
It is specious to suggest that gas prices have dropped because of alternative energy discussions. Oil demand ebbs and flows but is not seriously impacted by alternative energy. Most alternative energy: wind, solar; does not replace oil, it replaces coal (if at all). Bio fuels replace nothing. Right now they take so much energy to produce and distribute, they are net drains on the supply.
Hey Norman are you for real???? I just paid $4.09 a gallon for my gas at COSTCO in CALIFORNIA!!!!
Have you been to a grocery store this year!!??? Due to "ALTERNATIVE" Energy ie (CORN) my food prices have gone through the roof!!!!!!!! All because of your president!! The cost to feed the animals, the lack of supply of corn and the gas to get it all to market have all SOARED since your guy took office!! These prices are killing the average American (you know the one you guys supposedly care so much about)!
Meat prices are outrageous, have you tried to buy a box of cereal without a coupon?? What about the fact that peanut butter is currently going up 40% - where are the peanut subsidies??? (probably being shipped by all those electric cars?) - Oh wait the batteries died somewhere in New Mexico!! They are probably waiting for AAA to come and give them a charge.- Can they do that yet??
You go alternative energy guy!!
As for jobs, talk to the guys in Louisiana about those 200 plus jobs? What about the thousands already lost due to your alternative energy policies and the thousands that are being lost because you guys don't want a pipeline!!!
You keep waiting for the next Tesla - wait until cap and trade passes and electricity prices "necessarily skyrockets" as Obama said!! What's it going to cost to charge that golf cart??
You guys are so righteous - if you want to believe all this bull s--it go ahead but stop shoving it down our throats!!
A bit more info on Ford's direction, an upcoming introduction is Focus C-Max, which will compete with the Prius V. Ford's hybrid will use lithium batteries, which the Toyota does not.
In any case, hybrids have finally come close to having a cost/benefit payoff that makes sense to consumers. I'm not sure what price gasoline would have to reach for the price of all-electric motors in cars to make sense but why focus (no pun intended) on that route at the expense of others? The current administration's desire to "guide" auto manufacturers couldn't be fully exploited had Ford taken a bail-out but I wonder why a bit more objectivity couldn't achieve more mpg.
Overseas, Ford and others use very clean diesel engines that get 40+ mpg and you may wonder why we don't see more here in the US (other than VW). The answer is basically because gasoline-based hybrids are counted in the CAFE standards but diesels are not. It's a shame because diesels last virtually forever, I don't think we've fully considered the number of hybrid batteries that will have to be disposed of in a generation, and many customers would appreciate the choice of diesel.
One can only imagine how a diesel-based hybrid engine would perform but if current performance shows us that gasoline-based hybrids improve mpg by about a third to a half (compare the respective Fusion or Camry models, for instance), then a diesel-based hybrid could see something on the order of 60+ mpg or more.
Both diesel and hybrid passenger cars can be purchased for less than $25K, with the benefit of being attractive to buyers for other reasons, too. My bet is that a diesel hybrid car that cost less than $25K and got more than 60 miles per gallon would sell quite well indeed.
I could be mistaken, but I believe if you take Obama, Biden, and all the Secretaries of all the departments under Obama, and all the czars of all those departments, the total years of experience of all those people who have worked DIRECTLY in the auto MANUFACTURING world is a whopping ZERO YEARS. And they are the ones making "bets" on the auto industry for U.S. taxpayers? Now, that is a comforting thought.
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