Remarks by Ashok Goyal, Director, Product Development, Ford Asia Pacific Hiroshima, at the Alternative Fuels Seminar, 26th Bangkok International Motor Show.

Theme: Sustainable Mobility Opportunities for Thailand

March 29, 2005; Good afternoon, ladies and gentlemen. Thank you for this opportunity to speak to you today about the sustainable mobility opportunity for Thailand. I would like to begin by reading out a very special message on the future of ethanol from Mr. Ford, the head of our company:

"There's simply no two ways about this fuel question. Gasoline is going - alcohol is coming. It's coming to stay, too, for it's in unlimited supply. And we might as well get ready for it now. All the world is waiting for a substitute to gasoline. When that is gone, there will be no more gasoline, and long before that time, the price of gasoline will have risen to a point where it will be too expensive to burn as a motor fuel. The day is not far distant when, for every one of those barrels of gasoline, a barrel of alcohol must be substituted."

That message does come not from Bill Ford, our current CEO. That was from his great-grandfather, Henry Ford, our founder - the man who put the world on wheels.

Henry Ford said that in a magazine interview… in 1916 - in the middle of the First World War -when gasoline supplies were tight, prices were high… and experts predicted petroleum reserves would run dry within 25 years.

Between 1916 and 1919, Henry Ford explored ethanol intensively.

He adapted the Model T's carburetor to run on it. He traveled to Cuba to look at sugar cane plantations. He experimented with potatoes and strawberries and wood waste and all sorts of other things.

What finally stopped his experiments? Well, for one thing… gasoline shortages eased after the war. But the real problem was that the US brought in Prohibition - alcohol was completely banned for a decade. When that made his experimental motor fuel distillery illegal… Henry Ford threw up his hands and said, "Enough."

Some people might look back and say, "Henry got it wrong." After all, oil discoveries have stayed ahead of demand for nearly nine decades since.

At Ford, however, we prefer to believe our founder was very far-sighted.

In the same way, at Ford we firmly believe that His Majesty and the Royal Thai Government are both far-sighted and correct in their timing.

Petroleum suppliers have been able to maintain their global advantage over a century because they have been able to provide stable supplies to all parts of the world. And they have supplied gasoline at costs so low that no other fuel has been able to overcome the advantage of their vast, ubiquitous distribution system.

I don't mean by this to portray the oil industry as some evil monopoly. For a century they have done a very good job in serving consumers whenever and wherever they need fuel.

But circumstances are changing. Oil prices have more than doubled in 10 years. Experts are again warning - with much better data than in 1916 - that oil reserves may run out. And there are other factors that could not be foreseen 90 years ago. We have emissions issues and global warming to consider today. What's more, petroleum resources are not equally distributed - countries without oil must transfer a huge portion of national wealth to oil-producing states.

At Ford, we recognize all these factors. Our CEO, Bill Ford, was the first auto-industry leader to acknowledge global warming as a potential problem. And at the engineering level, we relish the challenge of developing innovative solutions to environmental problems.

Problem solving is our passion!

But we cannot solve all the world's problems alone. In a fiercely competitive industry we can only sell cars that customers want to buy… and cars that meet regulations set by governments. We cannot command anyone to switch to ethanol… or any other fuel.

But watch us respond. Ford has the technology and products to respond decisively today!

Since introducing our first fuel-cell vehicle in 1999 - the P2000 - Ford has rolled out a steady stream of prototypes each more advanced than the last.

In early 2000, Ford introduced a fuel-cell version of our popular Focus, using a methanol reformer. The same year at the California Fuel Cell partnership, we produced another Focus - this one featuring hydrogen compressed at 25 MPa.

In 2004, Ford introduced the Escape Hybrid in the North America.

Just as we were the company that put the world on wheels in our first century - in our next century at Ford we aim to lead in sustainable mobility.

And Ford will respond decisively as the Government of Thailand implements the measures needed to make ethanol the fuel of choice for its people. And already… we are greatly encouraged by His Majesty's support for bio-fuel projects.

Before discussing what Ford can do, let's look at why we are excited about the potential for ethanol as a keystone for Thailand's energy future. The Honorable Minister has already covered much of this ground, but I think it might be useful to offer our perspective.

Ethanol addresses a number of key questions, and heading the list are energy independence, rural economic development and sustainable mobility.

Last year Thailand spent nearly 470 billion Baht - almost 12 billion dollars - on imported oil. That is a lot of money to send out of the country.

Now imagine if we could take, say, 20% of that money and spend it not overseas… but in Thailand's Northeast - an agricultural area that could benefit from economic development.

The wonderful thing about producing ethanol from farmed crops is that you don't require prime rice land to do it. You need neither top-quality soil nor extensive irrigation. As Henry Ford identified in 1916, you can choose a crop to suit the conditions. And with all the wonderful things they can do in plant science these days, yields can surely be improved over time.

In a climate like Hawaii - which I assume is similar to parts of Thailand - each year you can harvest more than eight thousand three hundred liters of 99.5% pure alcohol from each hectare.

I'm not an agronomist, but just for fun, I've made some rough calculations.

Our friends at Bangchak Petroleum tell us that if everyone in Thailand switched to 20 percent ethanol fuel, we could replace 600,000 kiloliters of imported fuel. Assuming you could get a similar yield in Northeast Thailand, [SLIDE ANIMATION] for example in Khon Kaen. How much land would be required to replace 20 percent of Thailand's gasoline consumption with ethanol?

We have to take into account that a liter of ethanol yields less energy than one liter of regular gasoline. So to replace 600,000 kiloliters of gasoline we'd need 960,000 kiloliters of ethanol. So if our 8.3 kiloliter-per-hectare yield assumption is correct, we would need 1,156.6 square kilometers of cropland. You can imagine this as a square 34 kilometers on each side of Khon Kaen province.

What's more, the plant wastes left over from ethanol production make an excellent food source for animals.

From both a national balance-of-payments standpoint and a rural development perspective - ethanol would seem to make good sense for Thailand. [SLIDE ANIMATION] To us, this is exciting stuff!

There is also the question of what we call "sustainable mobility." In our industry we see this as multi-faceted:

* The safety of vehicle occupants, pedestrians and wildlife * Recycling of automobiles * Land use issues * Traffic congestion

But the front-of-mind issue is of course air quality… and the closely related issue of dependence on a finite supply of fossil fuels.

Ethanol offers some potential in terms of reduced emissions - but the true environmental benefit is that ethanol is a renewable resource that could reduce our dependence on fossil fuels.

In burning petroleum, you are pulling carbon dioxide from underground and releasing it. With ethanol you are using plants to capture and continually recycle CO2 that already exists in the atmosphere. So in this way we can say ethanol is sustainable.

What's more, the ability to grow the feedstock relatively close to where it's needed - Bangkok - adds to its sustainable credentials.

As long as Thailand can grow sugar cane and cassava, it will have a secure homegrown source of motor fuel.

At Ford, we do see a positive case for ethanol. Henry Ford saw it 90 years ago. But at Ford we do not see ethanol as a universal solution. We do not advocate that every country in the world should embrace ethanol.

Every nation has the freedom to choose its own energy path for the future… whether that path is conservation… or nuclear power… or windmills.

But we believe Thailand is making a wise choice in ethanol. And Ford will support that choice 100 percent… as we see the necessary measures implemented.

What measures does Ford believe Thailand should implement?

To make ethanol work, Thailand's commitment must be very solid and sustained. And we need to work together to overcome the 'chicken-and-egg problem.'

No one will produce ethanol if there is no market for it. No one will sell it if there is no demand for it.

How can we break that paradox?

I hope you'll forgive me if I compare the situation to how an engine works. I'm a powertrain engineer and that's how we think.

But this is like a four-cylinder engine.

* first cylinder is the farmer who must grow the feedstock; * second cylinder are the refiners and distributors who must make the fuel available; * third cylinder is the motor manufacturer that must make ethanol-burning cars; * and fourth cylinder is the customer.

To make this engine turn over and develop momentum, you must get all four cylinders to fire - and that takes fuel and a spark in each one.

That is why concerted effort by government is absolutely essential. Although market forces will kick in once we have momentum, market forces will not start this engine.

I think you will find that has been Brazil's experience. In cold-starting the program, the Brazilian government has had to pull the choke for a sustained period.

In plain language, this means that Thailand must provide incentives in all cylinders - for farmers, the fuel industry, automakers and consumers.

And for consumers, education will be important. But I think once people fully understand the benefits of ethanol they will support it strongly.

Sustained and balanced incentives may be the first part of the solution. The second critical piece is phasing in ethanol carefully and intelligently.

E20 - a 20 percent ethanol fuel blend - is a very efficient way to do this… because customers will be able to choose either regular gasoline or ethanol.

You won't be able to run E20 in a conventional car… but you will be able to run gasoline or E20 in an E20-compliant car.

When you switch between very different fuels, the engine needs to be able to sense the change and adjust itself - quickly, automatically and flawlessly.

The technology for this is quite sophisticated… and we must take care to ensure it works in Thailand's climate… but at Ford we know how to do it.

This is important… because it means we could start selling E20-compliant cars before the E20 fuel-distribution network is in place. Without incentives there would be no immediate benefit, but customers could use gasoline until E20 becomes available.

This has always been a problem with CNG - compressed natural gas. CNG is fine for taxis that always work in the same area… but ordinary motorists don't want to find there is no fuel if they go out into the countryside.

And this was initially a problem with ethanol in Brazil. As customers had to choose either gasoline or ethanol many were reluctant to switch. Ford of Brazil played a leading role in cracking this problem by developing Flex-Fuel technology that eliminated the need to choose.

We played a leading role in Brazil and we are prepared to play a leading role in Thailand.

Now here's the key question: Does Thailand have the unanimous will and the determination to push ethanol in a sustained way? If this initiative is to work, it cannot be half-hearted.

Sustained incentives will be needed all down the line to overcome the risks for farmers, the fuel industry, automakers and consumers.

Ethanol must be phased in flawlessly. Everyone involved must do his part. And we must set realistic goals. E20 is a smart, achievable goal - we can make this work.

At some future stage, Thailand may also be ready to aim at E85 - an 85% ethanol blend. But if we are to offer cars that can run E85 or gasoline flexibly… you should be aware that the technology required will be much more sophisticated and thereby cost consumers much more.

Over the past 14 years Ford has put more than one million ethanol vehicles on the road in North America, Brazil and Sweden. This includes both E20 vehicles and what we call "FFVs" - Flex Fuel Vehicles capable of running on any mixture from regular gasoline through E85.

So we have deep experience with both E20 and E85 technology. And from that experience we firmly believe that E20 is the right target for Thailand.

If we can work together to build momentum, Ford will be there to support Thailand's ethanol initiative. And - although I can make no announcements today - we are prepared to act quickly.

Ford is strongly committed to Thailand. We have a major plant - Auto Alliance Thailand - in Rayong. We have our Ford regional headquarters here in Bangkok. We now have more than 3,000 employees in Thailand.

Ford has a strong portfolio of products - Ford Ranger, Everest, Explorer, Escape, and Laser Tierra.

And, personally, I'm confident that Ford is going to provide great career opportunities to many more Thai people in the future - especially to up-and-coming engineers.

This year marks 40 years since I joined Ford Motor Company - and I've been with Ford for just under 40 percent of its 101-year history.

I started as a young engineer from India, not that long after arriving in America. Since then Ford has provided me with full scope to pursue my passion for engineering. Ford's technological spectrum is wide enough that we can explore so many frontiers of technology.

Even better, because we are at home in so many countries around the world we have the scope to explore advanced technologies not only from an American perspective… but from a Brazilian perspective, from an Indian perspective… and - as we have been doing today - from the perspective of a farmer in Thailand's Northeast.

For me, that has made today a delightful opportunity. And if Henry Ford were here, I know he would be enthusiastically urging us to push ahead and realize this ethanol dream.

Thank you very much!