Ford Plans Incentives on Smaller Engines to Meet Fuel-Economy Standard

Wednesday , 2:46 pm ET By , Staff Reporter of The Wall Street Journal

DETROIT, October 23, 2002 Norihiko Shirouzu wrting for the WSJ reported that Ford Motor Co. should be able to meet the government's fuel- economy standard but will have to offer "a ton of incentives" on vehicles equipped with V6 and smaller engines to do so, said the auto makers' chairman and chief executive William Clay Ford Jr.

"There is an underlining taxation policy in Europe which drives" consumers to buy smaller thus more fuel-efficient vehicle, Mr. Ford said in a meeting with institutional investors. "We don't have that here [in the U.S.]. We have to put a ton of incentives to move those V6s, and smaller engines even," to meet the fuel-economy standards.

The federal government's auto-mileage requirement, known as the Corporate Average Fuel Economy, or CAFE, standard requires an auto maker's fleet of cars to average 27.5 miles per gallon, and its fleet of "light trucks" -- sport- utility vehicles, pickup trucks and minivans -- to average 20.7 miles per gallon.

Strong sales of light trucks, many of which are equipped with V8 engines, have pushed down the average mileage of the U.S. new-vehicle fleet to about 24 miles per gallon, its lowest level in two decades.

Mr. Ford said sales marketing incentives are a must in the absence of a tax policy encouraging American consumers to buy smaller, less gas-guzzling vehicle. He noted American consumers have a huge appetite for bigger vehicles. They are " acting one way, saying, 'Give me biggest engine you have got, Give me the biggest vehicle you have got.'" On the other hand, CAFE is "pulling you in the other direction," added Mr. Ford. "So it forces all of us to do some unnatural things to hit our CAFE numbers."

Meanwhile, he said the Japanese yen's weakness is "hurting" Ford.