What did Illinois’ bid to produce the Ford Explorer cost the nation?

The news reported the other day that production of the Ford Explorer is being moved from a plant in Tennessee to Chicago.  This is estimated to bring 1200 jobs with it.  Tax breaks were a key factor in Ford’s decision to go to Chicago.  The Tennessee plant is being retooled to make small cars.

Nobody seems to have asked if the Explorer should be made at all.  It’s an overly-bulky vehicle which obstructs the view and increases the minimum safe following distance behind it, decreasing the carrying capacity of the roads.  Its high bumper height causes more damage to other vehicles in collisions, and its high CG leaves it prone to rollovers.  As a matter of public policy, it (and the SUVs from other makers) are less desirable than station wagons.

The SUV segment also affects our balance of trade.  Roughly 57% of all US petroleum was imported in 2008 (source:  Energy Information Agency); this is down from over 60% in 2005.  US petroleum liquids production has been on a steady downward slide since 1985, so it’s safe to say that every additional gallon burned by any given type of vehicle comes from imports.

The ratings I found for the 2009 Explorer are 13/20 for the 2WD V8, 14/20 for the 2WD 6.  At 60% city/40% highway this yields 15.9 MPG for the V6 and 15.1 MPG for the V8.  If we assume 160,000 lifetime miles for the vehicle, it will use on the order of 10,000 gallons of fuel over that distance.

That much fuel costs quite a bit.  If we assume 1 gallon of gasoline per gallon of crude oil*, at today’s crude prices of $80 per barrel it costs roughly $2/gallon and the lifetime supply costs about $20,000.  It has been much worse; at the 2008 peak, crude oil cost almost exactly $3.50/gallon.  The price is edging up, so $2.50/gallon may be a better estimate for the near future.  That would give a lifetime import cost of $25,000.

That is a LOT of money, and it goes to things like the 2,717 foot Burj Dubai.  What if policy had promoted other things instead of the Explorer?  If each Explorer rolling off the line was a Fusion hybrid instead, what would that do for the nation?

The Fusion hybrid is EPA rated at 41/36.  At 60% city/40% highway, the car would average 38.8 MPG.  Over 160,000 miles it would use about 4100 gallons of fuel, or about 5900 gallons less than the Explorer.  This is a $11,800 savings at $2/gallon crude, and nearly $15,000 at $2.50/gallon.  The Explorer’s invoice cost is also about $1000 more than the Fusion Hybrid.  The Fusion Hybrid is clearly easier on the wallet and the balance of trade.

What about the same car with different drivetrains?  The Fusion Hybrid costs about $3000 more than the Fusion SEL.  Over the same 160,000 miles, the SEL at 22/31 would average 24.9 MPG and use about 6400 gallons of fuel over its life.  The Hybrid saves some 2300 gallons, or about $4600 in crude at $2/gallon and $5750 at $2.50/gallon.  This is also better for both wallet and nation.  The Fusion Hybrid may later be converted to a plug-in vehicle if fuel prices or shortages make it worthwhile

Illinois’ tax breaks got a few jobs to benefit Chicago.  I don’t know the cost to the Illinois taxpayer, but the cost to the nation looks to be several times as much as the assembly workers are paid.  If the country was on the right course we would probably have done something much different.

* Not entirely accurate.  Gasoline is less dense than crude, and there is a small “processing gain”.


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