Ford CEO: Fuel-economy regs are bad for profits

Ford CEO calls fuel economy standards ‘market distorting.’

TRAVERSE CITY, Mich. (AP) — Ford Motor Co. President and Chief Executive Alan Mulally said Wednesday that federal regulations to improve fuel economy will cut into automakers’ profits by pushing them to build more small cars than demand warrants.

“You’re trying to force-feed the market rather than being market-driven,” he said during a panel discussion at the Center for Automotive Research Management Briefing Seminars in Traverse City.

“I’ve never seen a market-distorting policy like CAFE,” he said, referring to the Corporate Average Fuel Economy standards. He said some of the standards being discussed in Washington are not achievable under present technology.

He also seemed to favor an increase in the gasoline tax floated by U.S. Rep. John Dingell, D-Mich., although he said after the discussion that he wasn’t endorsing such an increase but that it should be part of the debate.

Several automakers, including Ford, opposed a Senate fuel economy increase included in an energy bill that would increase the requirements to 35 miles per gallon by 2020. House and Senate negotiators are expected to consider the changes next month.

Automakers’ preferences

Automakers have supported a more moderate increase in the standards that would raise fuel-efficiency requirements to 32 to 35 mpg by 2022.

Mulally said Ford favors higher fuel economy, energy independence and being good stewards of the environment.

“The auto industry can’t solve energy independence and it can’t solve global warming, but we absolutely want to be part of the solution,” he said.

A gasoline tax would be a more market-driven solution to solving the oil independence problem instead of CAFE, which has not worked, Mulally said.

“If we’re really going to work on this, then the way you get at it is you make an economic decision just like they do in Europe where the prices are seven, eight, nine dollars a gallon, and our behavior would change dramatically,” Mulally said during the panel discussion.

During a speech, Mulally said Ford is doing well in transforming itself into a smaller company with lower factory capacity that is less focused on truck-based vehicles.

The company’s sales have gone from 70 percent large sport-utility vehicles and trucks three years ago to about a 50-50 car-truck mix last month.

“This, as you know, is a tremendous transformation for the Ford Motor Company,” Mulally said.

He said the automaker will lose money in the second half of the year despite earning $750 million in the second quarter, but its loss will be lower than in 2006, and the company is on target to return to profitability in 2009.