Ford Motor Company’s operating model and product lines will be dramatically affected by the regulations around global warming. Transportation sector is responsible for 26% of the greenhouse gas emissions in the United States . Beyond competitive pressure between automakers, CAFE standards (Corporate Average Fuel Economy) forces auto makers to meet an average fuel economy across the fleet of vehicles they produce, based on their product mix. CAFE standards are set and enforced by United States Department of Transportation and intended to encourage technological innovation, and the reduction of greenhouse gasses through the penalty of heavy fines for every vehicle sold if the standards are not met. In 2011, standards were announced with a target of 54.5 miles per gallon by 2025 . Ford Motor Company, as well as all other automakers, must now rapidly innovate to efficiently power their vehicles in order to meet standards, maintain safety, and remain competitive and profitable. In addition to fuel economy requirements, the EPA sets strict emissions requirements for passenger vehicles.
There are a number of options Ford can pursue in order to meet the ambitious standards and most are based on the introduction of new technologies in these passenger vehicles. Many of these technologies exist but are expensive and have relatively low take rates. Ford must now implement these innovations on a wider basis to significantly move the needle on the fleet average fuel economy.
- Electric: Tesla has proven there is a significant market for eco-friendly consumers who want a quality electric vehicle, Ford needs to offer competitive models to maintain its significant market share and establishes an image as an innovator within the industry. This route requires significant investment in new battery technologies and research, electric motor production, as well as investment in the electric vehicle charging infrastructure. Many consumers worry about charging times as compared to a traditional gasoline vehicle, which can be refuel and back on the road within minutes.
- Hybrid: Hybrid vehicles, which supplement a gasoline engine with an electric motor to power the vehicle, are currently available but with relatively low take rates in the market and are thought of as a relatively niche vehicle. Hybrids tend to be significantly more expensive due to the additional powertrain components but that cost must come down relative to the non-hybrid counterparts in order to increase the purchase rate of these vehicles. Spreading cost across the entire vehicle line could close this price gap and increase the likelihood of consumers to purchase hybrid vehicle because they offer significant fuel economy benefits.
- Aerodynamics: Aerodynamics can reduce vehicle drag and improve efficiency, but are constrained to safety requirements and significantly impact customer purchasing decisions.
- Weight Reduction: As vehicles become lighter, they can be powered more efficiently, resulting in reduced emissions and less wasted energy due to friction. Lighter/smaller vehicles in the fleet have the potential to significantly impact CAFE compliance and greenhouse emissions over the vehicle lifetime. Light weighting can be accomplished through material improvements including the aluminum body panels, structural improvements allowing the reduction of material, introduction of small trucks to segment the truck market and provide fuel efficient options to those who want the utility of a truck bed but do not require the towing capacity of a large truck. Ford will be challenged to maintain crash safety when reducing weight and structure but material and engineering improvements can allow both of these goals to be met.
- Turbocharging: Already very common in many vehicles across the line of vehicles, Ford must continue to implement turbocharged vehicles and reduce cost relative to the non-turbocharged vehicles. Turbochargers produce more power out of smaller engines which makes vehicles lighter and reduce engine friction.
- Aftertreatment Systems: Catalyst improvements can significantly reduce harmful emissions but are costly to implement due to the high number of rare earth metals necessary. Particulate filters on engine exhaust also decrease emissions but are also costly and can have negative impacts on engine efficiency so that trade-off will need to be optimized as emissions restrictions change.
A mix of these options will allow Ford to be compliant with the aggressive standards set forth. While these standards force significant costs in research and development on the automakers and the costs are passed down to the customers, the costs of reducing greenhouse gasses is passed those actually producing them through their consumption habits. Ford will also have to make many changes as economic and social pressure mounts to become a more ecofriendly company. These changes could potentially include leaner manufacturing options, recycling material and components, the use of biomaterials or soy based plastics/foams in place of petroleum based materials. These changes will be beneficial to the brand in terms of brand image, long term costs, and ecological impact of the company but more much more loosely regulated than fuel economy and emissions. (799 words)
 Sources of Greenhouse Gas Emissions, From US Environmental Protection Agency Website, https://www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions, Accessed 11/3/16
 Corporate Average Fuel Economy, From Wikipedia, https://en.wikipedia.org/wiki/Corporate_Average_Fuel_Economy, Accessed 11/3/16