Ford Works to Expand Ethanol Production, Distribution

DEARBORN, May 21, 2007 – With increasing global consumption of
fossil fuels and consumers looking for “greener” choices in dealer
showrooms, Ford Motor Company is working to accelerate ethanol
production among a broad range of renewable fuel options for future

Ford has placed more than 2 million flexible-fuel vehicles (FFVs)
on American roads. The company’s current lineup of FFVs includes the
Ford F-150, Ford Crown Victoria, Mercury Grand Marquis and Lincoln Town

Last year, Ford, along with General Motors and DaimlerChrysler,
pledged to double annual production of vehicles capable of running on
renewable fuels by 2010. The automakers renewed a commitment this
spring to make half of their annual vehicle production capable of
running on alternative fuels by 2012. Key to that commitment, however,
is the need for an adequate distribution network for ethanol or E85, a
mixture of 85 percent ethanol and 15 percent gasoline.

“Not only does E85 access have to be convenient to customers,
it has to be at a price point that provides value,” said Curtis
Magleby, director, State and Local Governmental Affairs.

Magleby says there are approximately 1,200 ethanol fueling stations
operating in the United States today. Most are concentrated in the
Midwest. Compared to the nearly 170,000 retail gasoline stations in
business nationally, the need for additional ethanol availability is

At least 10 to 20 percent of the fueling locations would need
to have E85 available to really begin to have true customer access,
according to Magleby, who added accessibility is only part of the
challenge. The government needs to make E85 production more attractive
for energy producers, he said.

“Governmental and business policies in place today actually
provide greater financial incentives to those producing lower-level
ethanol fuel blends (E10 which is 10 percent ethanol and 90 percent
gasoline). The result is there is no business equation for many of the
major refiners or retailers to produce or sell E85. That has to
change,” said Magleby.

“Ethanol has lower energy level content than gasoline. E85 needs to be
discounted at least 20 percent under gasoline to provide value to
customers,” he added.

Ford entered into a unique E85 partnership last year with
VeraSun Energy Corporation and MFA Oil to create the Midwest Ethanol
Corridor. The goal was to provide flexible-fuel vehicle owners the
ability to drive between Chicago and Kansas City, fueled exclusively by
E85, while educating consumers about the benefits of ethanol in the

“I think the automakers, and Ford in particular, have stepped
up and shown leadership on this issue,” said Bill Honnef, senior vice
president, VeraSun. “This effort was a first for the industry, in that
Ford went from simply producing flexible fuel vehicles to proactively
looking to expand the E85 infrastructure. As a result, the ethanol
industry is expanding at a record pace.”

Honnef estimates that ethanol production in the U.S. will reach
a capacity of 14 billion gallons, or roughly one-tenth the annual
consumption of gasoline by American motorists (140 billion gallons),
within the next five years.

“Right now, America has no alternative fuel option; we’re
dependent on gasoline for transportation. Our challenge is to get the
ethanol infrastructure in place to match expected growth of production
to suport E85 sales,” said Magleby. “For every penny increase in the
cost of a gallon of gasoline today, it is a cost to the American
consumers of $1.3 billion.”

Perhaps the best example of an effective ethanol solution today
can be found in Brazil, where more than two-thirds of the vehicles sold
are already flex-fuel capable, including the ability to run on pure
ethanol, known as E100.

“About 10 years ago, the Brazilian government incentivized
their farmers to grow more sugar cane, which they convert to ethanol,
with the hope of reducing their dependency on foreign oil,” said Hau
Thai-Tang, product development director for Ford South America
Operations (FSAO).

“As market demands influence pricing, customers can switch from
100 percent gasoline to 100 percent ethanol, or any blends in between,
including E85. It gives the consumer a lot of flexibility.”

Thai-Tang says Ford has been a pioneer in delivering several
flexible-fuel products to the Brazilian marketplace, including the
Fiesta, Focus and EcoSport mini SUV. He adds that the company’s South
American experience will benefit future product development plans in
North America.

“We view ourselves as being the center of excellence within the
Ford community for doing flex fuel and ethanol vehicles,” Thai-Tang
said. “Every opportunity we have to share those learnings moving
forward, we’ll take advantage of.”

Today ethanol is primarily produced from corn, but Magleby says that may change.

“Work is being done to accelerate the transition toward a
broader array of biomass feedstocks, as an increasingly important part
of sustainability and greenhouse gas production,” he said.