November 16, 2011

Nancy Gioia Interview

Interview with Ford Motor Company's Director of Global Electrification, Nancy Gioia

I was delighted to have the opportunity to talk with Ms. Gioia. I was concerned that someone near the top of Ford's food chain might be a bit of an EV/hybrid zealot, but was pleased to find Ms. Gioia well informed and easy to talk to.

CT:         What was your first car?
NG:     The first car I owned was a '78 Chevy Chevette. It did everything. I found it very easy to use, easy to drive. It got me back and forth from university. It was something I could always count on. That’s the fun thing about cars; the journeys and the experiences you have with family and friends. Along the way... the things you see. Whether it's a long distance trip with the cooler in the back, or back and forth to school every day. I once ran to the Chevette to escape a mugger -- an exciting experience, but the car took me away and safe. That’s what people want; safety, security, something you can always count on, but still fun to drive. This is something I focus on with all the cars I’m a part of, whether it’s the 2002 Thunderbird or the 2010 Fusion. It’s the experience. It's not just about A to B; it’s having fun during the journey too, while being safe, durable, reliable, and affordable.

CT:      Why are we seeing more electric emphasis and not Hydrogen or Natural Gas right now?
NG:     For future sustainability, obviously consumers want better and better fuel efficiency; reduce the costs. Governments want energy security, and whether or not you believe in climate change or not, we can all agree that using less energy is the smart thing. Now at Ford, we happen to believe climate change is real. We’ve actually done a look globally of our fleet and we’ve taken the amount of CO2 as a surrogate, we’ve broken it out by region. We’ve looked at our fleet in those regions and we’ve said OK, we’re going to do our part. We’ve identified CO2 reduction targets for each of our products. And what that leads us to do is then also not just look tank to wheels, just the vehicle attribute, but we actually look at well to wheels in our analysis. When we did that what became obvious is we now have to understand where the source of the fuels comes from. In our future plans, electrification is one of the few fuels we see global alignment around to make available to consumers. In North America and Europe we see the utilities moving towards a cleaner grid. When we looked at those two combinations, electrification and for us that means hybrids, plug-ins hybrids, and full-on electrics.

Natural gas, when you do the CO2 equation, is better used to displace coal in electrical plants than gasoline in cars. The great news is that coal plants can convert to natural gas without having to re-engineer the entire plant. We see natural gas as a good solution in situations where a company has a fleet of vehicles that stay within a certain region, and therefore only needs the gas distribution infrastructure in a couple of places. For light duty transportation or cars that may have to go greater distances, with the cost to build the infrastructure to increase the availability of natural gas, we don’t see that as globally aligned – or even nationally aligned.

As for biofuels – biodiesels and ethanol. You really have to get the cellulosic ethanol for it to make sense from a CO2 basis. Otherwise, there’s still just too much carbon in the whole process. However, we certainly see biofuels becoming a large portion in the mix over time.

Hydrogen has the challenge of not only the fuel cell technology and its great expense, but the lack of infrastructure.

Ultimately, we have to consider how fast the world can transition from one power source to the next. Electrification, whether it’s a self-regenerating hybrid that does not have to plug into the grid, or plug-in hybrids and full electrics, we see a good combination of that across the world.

CT:      How is Ford setting itself up to be apart from the Nissan Leaf or Chevy Volt?
NG:     Our strategy is fundamentally different than most of the competition. Instead of doing a one-off vehicle, we are electrifying our highest-volume global platforms. For us, that’s really important because Ford believes in affordable transportation for the masses. We may do a low-volume electric car as an introduction, and it may make a difference for those few buyers, but it will not make a difference for the masses. We do not want to impact only a few, but many. We’ve electrified, for example, our C-sized vehicle platform. On that platform are Focus, C-max, C-max Energy, Transit Connect, and Transit Connect Electric, which you drove. Those are all built on that same platform, meaning the underpinnings are the same, with different bodies. We’ve produced over ten different vehicles on that same platform – over 2 million units per year. So, when we electrify the platform – hybrid, plugin, and battery electric – we electrify it across the whole line of vehicles that are based on that platform. It’s a great use of our engineering assets. Also, because they’re built down on same line, we can easily cross-train the factory workers that build them. But it’s not only the capital asset re-use, it’s also the supply base. We actually take it to a level lower at Ford – which is unique from our competition. Our hybrids and plug-in hybrids share all of the same components (with the exception of the battery -- the battery cells are different and the size of the battery is different). The transaxle, the electric motor, the electronics – all of those components are identical. Not similar; identical! So the Fusion hybrid and the C-max Energy hybrid share most of their components. That larger-scale scale use of components in turn helps affordability. It also builds a more sustainable business for our suppliers. So by electrifying our C platform, we’ve electrified our CD platform: the Fusion, the Mondeo.

Ten different cars on one main platform – again, just short of 2 million units globally. Depending on what cars are built and sold in each region, we can easily bring that technology to the region because we build the same vehicle globally.

So, the Focus Electric – it’s a hoot to drive. The ride, the handling, the steering – it’s a real car. Rather than feeling like a Science experiment, it rides, handles, and steers responsively, just like a Focus. One of the things we that we want to do is de-mystify the technology. We don’t want the customer to hop in the car and say, “How do I have to drive this different?” Granted, you have to charge it, which is different from gassing up, but the driving experience is the same. One of the barriers of accepting new technology is not only the question of affordability, but is it so different that no one is willing to try it? What we’re trying to do is make the driving experience, “Wow, this is really cool to drive!”

CT:      Globally, where are markets that are emerging for Electric Vehicles, and which markets aren’t ready yet?
NG:     With an electric vehicle, you’re adding a battery, motors, electronics, and for the plug-in hybrids and hybrids you have combination of conventional power and electric power. A battery electric car uses a much bigger battery, which is very expensive. We find affordability to be the primary challenge. For example, China’s electrical supply is being stretched because of the amount of economic growth they have. But they do have some really dense megacities. In the future, we envision more of these megacities, in which transportation solutions will require different approaches – a combination of public transportation and personal mobility. Electrification may make a lot of sense in areas with limited driving distances; in areas where you have very, very long distances, full electrics don’t make as much sense, but plug-ins, hybrids, or even Ecoboost engines may.

Where we see full electrics being adopted first is by more affluent customers. They typically have a garage and the resources to add the required charging infrastructure. They may have other vehicles, so it’s not necessarily their only car. It could be the one they use for city driving, then they have other vehicles that they use for long distance driving or towing and load hauling. North America is one of the biggest markets of electrified vehicles; with hybrids dominating that. Japan has incentivized electric vehicles, and they continue today on hybrids. In Japan today, hybrids or full electric vehicles constitute about 10% of their vehicle fleet. In North America, hybrids, plug-ins, and electrics represent about 2.3%. Korea (South) is also growing.

When I travel to South America, which is dominated by Brazil’s market, and therefore dominated by ethanol, you don’t really see electrification happening there. They have a wonderful fuel source from the sugar cane, and they’re likely going to remain that way. Other parts of South America don’t have the affluence to afford electrification, so they’re looking at A, B, and sub-B cars; C-sized are probably the largest.

In Europe, several countries are interested. France, with its huge nuclear power infrastructure, in combination with Renault, PSA, and others, is trying to make France a center of full electrics. There’s also lots of interest in London. In the Nordic countries, we see higher incentive levels that are encouraging electrification.

It’s really looking at driving patterns, how customers use the vehicles. Are there lots of hills or no hills? Mountains or no mountains? Average speeds? The one thing we see is fuel diversity will continue to about 2050. Consumers really understanding how they use the vehicle, what they need for their personal mobility, and matching the right technology to their needs, is the challenge that we have as automakers. That’s a huge learning challenge we have going forward.

CT:      Kansas City is very spread out and you can clock close to 100 miles a day here, if you’re not careful. What would you suggest for KC residents?
NG:     A full battery electric may not be the right choice for you. Your better, more sustainable solution could be the plug-in hybrid. If you do most of your driving during the day, and you drive less than 30 miles per day, and then on weekends or 2-3 times a week, you have much longer distances to go, that plug-in hybrid might be the best solution. If you do a lot of urban driving, but more frequent highway driving then the hybrid is right for you. If you have a load hauling or towing need, then Ecoboost. Gas turbo direct injection on a downsized engine. The F-150 is a great example, fantastic performance with 20% better fuel efficiency. In my driveway, I have a Lincoln MKZ hybrid and an F-150 Ecoboost. We have two horses and a horse trailer, and the performance is wonderful. Also, for people carrying or load carrying, we have the Transit Connect Electric. It’s a fantastic urban delivery vehicle; fun to drive, quiet – it does everything.

To appeal to the mass market, we’re going to have to drive the cost of the components down.  Scale is important and technology is important, so we spend a lot of time researching and developing for technology evolution. We also spend a lot of time modeling and helping customers understand what’s the best technology for them.

CT:      How is Ford looking to get involved with North American infrastructure for electric vehicles?
NG:     We’ve developed collaborations with many of the utilities. Kansas City Power & Light is one. Across the entire country, there are about 3,000 utilities. We started building partnerships with utilities years ago with our electric vehicle work in the 70’s and 80’s. We expanded that with the Ford Plug-in Project, which we kicked off in 2007, where we made some plug-in hybrid Escapes. For that, we partnered with 12 utilities across North America, and we’ve learned some great lessons. The Department of Energy and Electric Power Research Institute were also a part of that. We’ve also brought in Best Buy. If you go to a Ford dealership and buy a plug-in vehicle, we have an arrangement. When a consumer says, “I’d like to get a home charger installed,” we ask “Would you like to do that through Best Buy?” The Geek Squad comes out and handles all the assessment, permitting, and installation, including communication of customer needs with the local electrical utility. If you have three or four of them on a street, then the utility is ahead of the curve and can address any issues that may occur at a local distribution point. It’s all about collaboration and unlike no other time, with the new fuel providers and equipment installers.

We’re also working with Microsoft. They are doing cloud data computing, working with utilities to get access to data like what it costs to charge, dollars per kilowatt hours. In the Focus, whether you’re in your car, at your computer, on your smart phone, or at your charging station, you can say “Charge at the lowest possible cost.” If the utilities are a part of this effort, then it can assure your car is charged for you in time at the lowest possible rate. It’s way cool! Another MyFord mobile feature: you can punch in the places you want to go to your smart phone, it communicates with the car, and it will say “Oh, you added the pizza shop, you aren’t going to be able to make it.” The car will then give you a route recommendation, tell you that if you turn off the A/C or heater, you’ll have enough power, or where the charge stations are, and how long you will need to charge to make it home. One of the things with full electric vehicles is managing range anxiety. We want to take the anxiety away by giving tools to the consumer.

There are lots of things coming out in the future with connectivity that we need to make available as we plug vehicles in, such as reserving charge stations. We’re working with all of the partners to develop solutions that are both affordable and available. We want to charge safely, easily, and affordably. We want to make sure that the infrastructure is installed at the right time, not sitting there empty. Charge at home or charge at work. The lowest priority is public charging. The last area we work on is standards – standards that are as common as possible between North America and Europe. Europe has really started to develop standards with the SAE and IEC to make sure the plug between North America and Europe has some commonality. Why is that important? As always, affordability.

CT:      Tesla has the electric sports car. Are we going to see a Mustang Electric?
NG:     Can it be done? Absolutely. Does it make sense for the customer? When there’s customer desire for it, we have the technology. In the sports car market and the luxury car market, you still have to meet the underlying customer want.

CT:      What is the 5 year strategic plan?
NG:     My plans go out to 2050. Five years are lock and load. Out to ten years our cycle plans are complete. This goes back to our fundamental strategy. We will have five new electric vehicles on the road ten years from now. Today we have the Fusion hybrid, the Escape, and next year we will launch the C-max and C-max energy. We already launched Transit Connect Electric in 2010, and later this year, the Focus Electric.

In our next generation of hybrids, we take another 30% of the cost of the electrified system out. So when we launched the Fusion hybrid in 2009, from the original Escape we took 30% of the cost out. We launch the next generation hybrid in 2012, and we’re taking 30% of the cost out. We’re doing that through technology, architecture, and scale. Scale is starting to become a part of this. Fundamentally, we want to deliver the better fuel efficiency than any of our competition.

Our other strategy is to electrify our highest volume platforms, reuse the components, and then develop them based on the segment draw around the globe. Today about 1% of Ford’s global fleet is electrified. By 2020 10% to 25% of our fleet will be electric. That’s a pretty big range, but if you’re at 1% going to 10%, let alone all the way to 25%, that’s a big change. Of that 10 to 25% we see about 70% hybrids, because they’re the most affordable, easiest to use in the broadest number of applications, and globally applicable in a way that’s not tied to infrastructure. 20 to 25% will be plug-in hybrids. We see that as less infrastructure, for example C-max Energy recharges in 3 to 4 hours on a 110 outlet. You don’t need a special charger for it. We designed it that way on purpose. We wanted less infrastructure cost for the consumer. We think it’s a great match for people who make a number of short trips, but need a little longer range. The remainder will be full electric. Full electric cars will still be a small niche – the size of the battery, the cost of the battery, the charge infrastructure, and the range limitations won’t fit many consumers.

CT:      Any advice for attending the North American International Auto Show in Detroit?
NG:     Bring a pair of mittens. It’s great. It could be 40 and sunny or -20 and snowing. We’ve had both.

P.S. I am going up to Detroit. I’m not going to be there for an extended stay, but I’m going to fill my time there with as much of the show as I can and then sleep when I’m dead. There is also a Ford Fantasy Design Camp that I’m going to attend while there. Should be very interesting! It’s not every day that you meet a major manufacturer’s design team, so I’ll take what I can get.

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