http://www.businessweek.com/magazine/content/08_37/b4099060491065.htm?chan=rss_topStories_ssi_5 The 65 mpg Ford the U.S. Can't Have <!--/HEADLINE--> <!--DECK--> Ford's Fiesta ECOnetic gets an astonishing 65 mpg, but the carmaker can't afford to sell it in the U.S. <!--/DECK--> The ECOnetic will go on sale in Europe in November by David Kiley If ever there was a car made for the times, this would seem to be it: a sporty subcompact that seats five, offers a navigation system, and gets a whopping 65 miles to the gallon. Oh yes, and the car is made by Ford Motor (F), known widely for lumbering gas hogs. Ford's 2009 Fiesta ECOnetic goes on sale in November. But here's the catch: Despite the car's potential to transform Ford's image and help it compete with Toyota Motor (TM) and Honda Motor (HMC) in its home market, the company will sell the little fuel sipper only in Europe. "We know it's an awesome vehicle," says Ford America President Mark Fields. "But there are business reasons why we can't sell it in the U.S." The main one: The Fiesta ECOnetic runs on diesel. Automakers such as Volkswagen (VLKAY) and Mercedes-Benz (DAI) have predicted for years that a technology called "clean diesel" would overcome many Americans' antipathy to a fuel still often thought of as the smelly stuff that powers tractor trailers. Diesel vehicles now hitting the market with pollution-fighting technology are as clean or cleaner than gasoline and at least 30% more fuel-efficient. Yet while half of all cars sold in Europe last year ran on diesel, the U.S. market remains relatively unfriendly to the fuel. Taxes aimed at commercial trucks mean diesel costs anywhere from 40 cents to $1 more per gallon than gasoline. Add to this the success of the Toyota Prius, and you can see why only 3% of cars in the U.S. use diesel. "Americans see hybrids as the darling," says Global Insight auto analyst Philip Gott, "and diesel as old-tech." None of this is stopping European and Japanese automakers, which are betting they can jump-start the U.S. market with new diesel models. Mercedes-Benz by next year will have three cars it markets as "BlueTec." Even Nissan (NSANY) and Honda, which long opposed building diesel cars in Europe, plan to introduce them in the U.S. in 2010. But Ford, whose Fiesta ECOnetic compares favorably with European diesels, can't make a business case for bringing the car to the U.S. TOO PRICEY TO IMPORT First of all, the engines are built in Britain, so labor costs are high. Plus the pound remains stronger than the greenback. At prevailing exchange rates, the Fiesta ECOnetic would sell for about $25,700 in the U.S. By contrast, the Prius typically goes for about $24,000. A $1,300 tax deduction available to buyers of new diesel cars could bring the price of the Fiesta to around $24,400. But Ford doesn't believe it could charge enough to make money on an imported ECOnetic. Ford plans to make a gas-powered version of the Fiesta in Mexico for the U.S. So why not manufacture diesel engines there, too? Building a plant would cost at least $350 million at a time when Ford has been burning through more than $1 billion a month in cash reserves. Besides, the automaker would have to produce at least 350,000 engines a year to make such a venture profitable. "We just don't think North and South America would buy that many diesel cars," says Fields. The question, of course, is whether the U.S. ever will embrace diesel fuel and allow automakers to achieve sufficient scale to make money on such vehicles. California certified VW and Mercedes diesel cars earlier this year, after a four-year ban. James N. Hall, of auto researcher 293 Analysts, says that bellwether state and the Northeast remain "hostile to diesel." But the risk to Ford is that the fuel takes off, and the carmaker finds itself playing catch-up—despite having a serious diesel contender in its arsenal. Kiley is a senior correspondent in <cite>BusinessWeek</cite>'s Detroit bureau.
2nd highest corporate tax rate in the world. Even though I'd rather have an Explorer, I would definitely drive that.
I'm sorry, what does this story have to do with the corporate tax rate? but if you want to go there, let me point out that in many countries, asset depreciation is not deductable. There are probably other deductions here in the U.S. that are not available elsewhere. Also, in some countries there is a B2B sales tax. Thus, simply comparing the nominal tax rate is pretty irrelevant.
Don't forget using large amount of debt, that was accumulated to finance growth, to offset income for tax purposes. Or the large number of accountants that make, as a group, tons of money working on preparing and auditing corporate taxes.
apparently, if you believe this article, taxes are not the primary reason why the car is not going to be sold in the U.S.; it is the preferences and boases of the American consumer. Regardless, "taxes" and "regulation" are not interchangable.
People aren't going to buy cars that use gas that costs $1 more gallon to run. One party in congress has pushed CAFE standards since forever, yet here's the 65 MPG car built by a US company that is economically unfeasible to sell here because of the rules that same congress passed.
Again, that is marketing. $1 dollar more per gallon for that many more miles per tank is easy to sell. This is a nation that thrives on purchasing over priced coffee and smoothies.
California certified VW and Mercedes diesel cars earlier this year, after a four-year ban. Do the math, indeed.
yes, do the math. That has nothing to do with the article whatsoever, which I thought is what this thread was about. Not to mention it is IRRELEVANT because the car has just been introduced, and therefore would not have been subject to this ban. Furthermore, you just got through blaming Congress, and now you raise a state-imposed regulation.
Volkswagen News New regulations could end many U.S. diesel passenger car sales New U.S. emissions regulations affecting 2007 model year vehicles may force companies like Volkswagen to stop offering cars with TDI in the United States. Leftlane has received a handful of reports from VW dealers in the U.S. regarding this rumor, with each source reporting virtually the same thing. While it’s possible automakers will find a way to meet the new regulations before it begins building MY2007 cars, the current thinking is that there is no economical way to quickly comply with the new rules. Instead, VW will likely have to wait for scheduled redesigns to introduce new technologies, which means the U.S. market could be left without diesels for some time. Some manufacturers will be able to circumvent the new rules by classifying their vehicles as “trucks,” but this loophole would only be applicable to borderline crossover vehicles. Accordingly, diesel variants of vehicles like the VW Touareg are likely to be eligible for sales in the U.S. in 2007.
this line of argument is ridiculous. Clean diesel is a very new technology, and it will take a few years for the rules to be updated. I wouldn't be at all surprised if the EPA has programs designed to support the private development of clean diesel technology.
Clean diesel is newer than 2007? That's REALLY new! Wait a second here... The VW cars and the NEW REGULATIONS are from 2007.
