Ford Hybrids Face Battery Supply Hurdle

Ford Motor Co. has high hopes for its upcoming ’10 Ford Fusion and Mercury Milan hybrid-electric midsize sedans, both of which recently obtained Environmental Protection Agency ratings of 41 mpg (5.7 L/100 km) in the city and 36 mpg (6.5 L/100 km) on the highway.

The hybrids, powered by an electric motor and Ford’s new 2.5L 4-cyl. engine, boast a range of more than 700 miles (1,127 km) in city driving and travel at speeds up to 47 mph (76 km/h) in electric-only mode.

But a leaked memo obtained by The Detroit News raises questions as to whether Ford will be able to produce the hybrids in sufficient volumes to appease fuel-conscious buyers.

“We are constrained by the amount of components – including batteries – that the supply base can provide us,” Mark Fields, president-The Americas, says in the memo. “That said, we will continue to work with suppliers to look at every opportunity to meet demand and still provide a good return for the business.”

Both sedans’ electric motors are powered by next-generation battery packs supplied by Sanyo Electric Co. Ltd. Calls to Sanyo seeking comment were not immediately returned.

The Japanese battery maker’s new nickel-metal-hydride “traction” battery cells are lighter and can produce 20% more power than the power pack currently used in the ’09 Ford Escape and Mercury Mariner hybrid-electric cross/utility vehicles.

Ford Fusion Hybrid achieves 41 mpg in city driving.

Ford is hoping to use the Fusion and Milan hybrids to bolster its image as a producer of fuel-efficient vehicles. Although it already boasts numerous models that are among the fuel-efficiency leaders in the industry, public perception of the Detroit Three as makers of fuel-hungry trucks and SUVs has long plagued Ford.

If Ford is able to produce large volumes of hybrids, it would do much to bolster its image, says Erich Merkle, an auto analyst at Crowe Horwath LLP.

“I consider it a green halo vehicle,” he says. “For years, everyone has talked about performance halo vehicles, which are good, too. But don’t underestimate the power of a green halo vehicle and what it means for the entire product lineup. That’s what Toyota has been beating people over the head with for years.”

According to the EPA, the ’10 Fusion and Milan hybrids’ fuel economy in both city and highway rating trails only the ’09 Toyota Prius, which achieves 48/45 mpg (4.9/5.2 L/100 km) against Ford’s 41 mpg city/36 mpg highway.

Honda Motor Co. Ltd. also sources its batteries from Sanyo, while batteries for Toyota Motor Corp.’s hybrid-electric vehicles, including the Lexus brand, are sourced from Japan’s Panasonic EV Energy Co. Ltd., of which Toyota owns a controlling interest.

Although battery constraints may pose an issue for Ford, it also may actually help the auto maker’s new HEVs, says Merkle, noting hard-to-find vehicles are sometimes appealing to consumers. “Getting something nobody else has a little bit of a mystique around it if you play it right.”

Battery constraints long have plagued Ford’s Escape and Mariner HEVs. Most units are allocated to the West Coast, where hybrid demand is greater.

Through November, Ford delivered 16,067 Escape and 2,306 Mariner hybrids, Ward’s data shows. By comparison, Prius sold 151,025 units in the same time period, while Honda delivered 30,261 Civic Hybrids.

Ford has not announced projected annual volume figures for the Fusion or Milan hybrids. Both vehicles will be built at Ford’s Hermosillo, Mexico, assembly plant.

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