Ford to Use Federal Funds to Boost Energy Efficiency

Dearborn, Mich.-based automaker Ford Motor Co. is taking almost $400 million in funds from the Department of Energy to improve the fuel efficiency of one of its marquee vehicles. With the loan, the Ford Explorer is expected to get an environmental makeover of sorts, possibly re-invigorating the brand and the once-adored Sport-Utility Vehicle.

The funds will be used in a Chicago Ford plant to develop the next generation of the Explorer. Goals are set to get 25 percent better gas mileage, which would be a marked improvement. Environmental Protection Agency reports show that current model-year Explorers get just 15 miles per gallon on city roads, and 21 miles per gallon on highways. The 25 percent improvement would make the Explorer more popular with consumers and could also help improve Ford's image worldwide.

Ford isn't waiting long to start working on the plan. Estimates call for the project to start in late 2010, which means Ford needs to hire an expected 1,200 workers to fill the plant.

Funds are part of a Department of Energy loan program totaling $25 billion. Goals of the loans include improving overall fuel efficiency as well as helping the struggling and lagging U.S. auto industry as it tries to compete with foreign automakers. This isn't the first loan for Ford from this program — in 2009, Ford received $5.9 billion. In total, it's estimated that the loans will help ford revamp or re-open nearly a dozen manufacturing plants and facilities across the nation. So far, Ford is the biggest recipient of loans and funds from the program.

The federal loans are just part of a series of incentives, tax breaks and other state- and federal-sponsored initiatives to not only improve the auto industry, but also save jobs and promote economic growth within the industry. The state of Illinois is offering tax incentives to Ford. Published reports state that Ford managed to get incentives on payroll taxes, rather than cuts on corporate income tax rates.

The Explorer debuted in 1990 and became the iconic face of the Sport Utility Vehicle movement. It's estimated that more than 6 million Explorers have been sold since 1990, and it was the best-selling SUV of its size for most of the last 19 years. But recent sales have lagged, likely stemming from lack of consumer confidence in the U.S. auto industry as well as concerns about fuel efficiency and environmental friendliness.