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The U.S. Risks Losing Its Global Lead in Energy Innovation According to Ford Motor Company's Cha

Ford Motor Company's long-time chairman, William C. Ford, Jr., voiced a sober warning about the future of U.S. innovation in a December 7, 2017 article in the New York Times. Ford’s warning:

-- The U.S. is at risk

-- In eliminating funding for the programs that attract private investment and stimulate energy innovation, the U.S. Congress is ignoring the market economy, and market trends in other countries around the world, that are pointing the way to areas of future growth and contraction.

-- The U.S. does this at its peril of losing its world leadership in energy innovation and its dominance in the global economy.

-- In fact, the U.S. already has ceded its leadership in several technological areas, such as solar panel and wind turbine manufacturing, which the Chinese now dominate.

-- The example cited by Chairman Ford is electric cars, China's dominance in that market, and the steps China is taking to lock up the future of this market.

At the same time, the U.S. Congress has been following recommendations contained in the President’s 2018 Budget, championed by Office of Management and Budget (OMB) Director Mitch Mulvaney, to rescind $24 billion in funding for the U.S. Department of Energy's (DOE's) Title 17 Loan Guarantee and Advanced Technology Vehicle Manufacturing (ATVM) programs.

These two programs, plus a third program available through the U.S. Department of Agriculture (USDA), are the only programs available to the private sector in the U.S. to bridge what is known as “the valley of death” when a new technology is ready to make the crucial step from research and development to commercial introduction in the U.S. market.

This is a step that private sector lenders find too risky to undertake – due to the increased chance of failure when a project uses something that is brand new, unproven, and never done before at commercial scale – thus leaving many promising technologies to die one step short of completion.

When the Chairman of Ford Motor Company sounds an alarm, it's wise to listen

-- The U.S. Congress appears all too willing to cancel, reduce funding, and de-emphasize the very programs that could help the U.S. dominate fast-developing, emerging global markets.

Electric cars is a perfect example:

-- Numerous car manufacturers – Ford, Volvo, Volkswagen, Porsche, Mercedes, and even Rolls Royce – are racing to develop electric vehicles.

-- Moreover, many of these manufacturers are planning to phase out the production of cars with internal combustion engines, with some manufacturers such as Volvo eliminating their production entirely starting as early as 2020 just two years away.

-- 14 countries – Austria, Britain, China, Denmark, France, Germany, India, Ireland, Japan, Korea, the Netherlands, Norway, Portugal and Spain which, together, according to the International Monetary Fund, represent 42.5% of the world economy – have announced that they will ban the sale of all new passenger cars and vans with internal combustion engines starting as early as 2025, or are setting aggressive targets for the production and sale of electric cars:

Ford Motor Company is the second largest U.S. automotive manufacturer, a position it has held for 56 years, with 14.7% of the U.S. auto market as of October 2017. It is the seventh-ranked automotive manufacturer in the world, behind Toyota, VW, Mercedes, BMW, Honda, and GM, and employs over 50,000 factory workers in the U.S. Among Fortune 500 companies, Ford is the 9th most valuable company in the U.S.

According to the December 7 New York Times article, Ford Motor Company is planning to offer 15 new models in China by 2025 that run at least in part on batteries.

Here's why: The article reports that the Chinese government "has taken a major role in electric car development and is pushing to dominate the market." It is doing this by "offering global automakers enticing financial carrots and threatening them with weighty regulatory sticks." As a result, the article says, "State-controlled automakers have begun making massive investments into electric car production."

The irony is that:

--Two of the pre-eminent electric cars in the U.S. – the Tesla Model S and Nissan Leaf – were launched by loans through the DOE’s ATVM program.

-- Ford Motor Company used an ATVM loan to develop its Eco-Boost engine, which is now available in all Ford automobile and truck models, and is emblazoned in advertisements on its race cars, such as the 2016 Le Mans-winning and 2017 class-winning Ford GT.

-- The success of these innovations – and the way they have stimulated additional private sector investment, created jobs, and become market leaders – underscores the value of the Title 17, ATVM, and USDA Section 9003 Biorefinery, Renewable Chemical and Bioproduct Manufacturing Assistance Program and Section 9007 Renewable Energy for American Program (REAP).

The U.S. already has lost at least one opportunity for economic growth and job creation due to the threatened elimination of these programs.

-- According to a Washington, DC attorney who has been involved in discussions with China Energy Investment Corp., the world's largest power company by asset value, that announced in November 2017 that it is investing $83.7 billion in shale gas, power and chemical projects in West Virginia, a Chinese electric car manufacturer that had expressed interest last spring in coming to the U.S., using the ATVM and Title 17 loan guarantee programs to launch its commercial introduction in U.S., has cancelled its plans to venture into the U.S. market due to the uncertainty surrounding these programs.

-- The China Energy Investment deal also hinges on an expectation from the Chinese government that the U.S. government will provide funding to stimulate investment through programs such as the Title 17 and ATVM programs, according to the Washington, DC attorney.

There currently are almost 2,000 projects in the Title 17, Section 9003 and Section 9007 pipelines, in which companies have invested years of time and millions of dollars to reach this point.

According to a December 2016 DOE press release, more than 70 projects are in the Title 17 pipeline, which represent “almost $50 billion in loans and loan guarantees,” for projects that are ready to go forward, will “leverage additional private dollars for major infrastructure projects,” and will “create thousands of good-paying American jobs.”

These projects will be stopped in their tracks if the funds that Congress has rescinded from these programs are not restored.

You can help restore this funding. To find out how, please go to the December 8 blog, "You Can Make a Difference. Here's How:"

For a one-page list of talking points supporting the USDA’s Section 9003 and 9007 programs, view our December 8 blog "U.S. Department of Agriculture Innovation Programs at Risk," or click here to download a copy.


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