São Paulo, Brazil, the country's largest metropolis with over 19 million people, is called "the Detroit of South America" as it is home to Ford Motor Company, General Motors (GM) and Honda manufacturing plants. Those plants are feverishly churning out more flexible-fuel vehicles (FFVs) to satiate Brazil's growing market for ethanol-powered vehicles, which is considered to be the largest in the world. In August, the De Alagoas Tribune, the daily newspaper of Alagoas, Brazil, reported that assembly plants in the country had produced more than 2 million FFVs in 2006.

On average, ethanol is 40 percent cheaper than gasoline in Brazil and offered at nearly every fueling station in the country. In addition, FFV models are usually comparably priced or even cheaper than non-FFVs, a factor attractive to Brazilian motorists. In 2006, nearly 75 percent of all new vehicle sales in Brazil were FFVs, according to Ford.

U.S. companies, specifically Ford and GM, have played a big role in the success and growth of the FFV market in Brazil. Indeed, ties between the U.S. and Brazil auto industries seem—on the surface—to be strong, but behind the enormous global operations lurk some controversial issues. Environmentalists in the United States, for instance, often wonder why U.S. companies like Ford and GM don't offer the light-weight, fuel-efficient FFVs they sell in Brazil back home. The Washington Post offered one answer to that question in May, 2006 when it accused GM of being "hampered by a North American marketing belief that American consumers won't buy these models, and by labor politics that prevent the U.S. entry of those little cars and trucks because they are not assembled by the United Auto Workers (UAW) union."

Honda and GM tell Ethanol Producer Magazine, however, that there simply isn't a demand for vehicles like the Honda Fit or the Chevrolet Vectra in America. If there was sufficient demand, the infrastructure necessary to support an ethanol program similar to the one in Brazil doesn't exist yet. "We need more E85 pumps than the 1,100 that we have [in the United States]," says Dave Barthmuss, manager of public policy, environment, and energy for GM North America.
The UAW's position against the entry of foreign-built automobiles is similar to domestic ethanol producers' anxiety over Brazilian ethanol imports. They contend that if there wasn't a tariff on imported ethanol, the U.S. government would instead be subsidizing foreign production. This was the position of U.S. Sen. Chuck Grassley, R-Iowa, who sent a letter to President George W. Bush in December, urging him to reject any efforts to remove the tariff.

The Need for More Ethanol
The idea of repealing the tariff to increase the amount of ethanol entering the United States, where gasoline demand is about 140 billion gallons compared with Brazil's 6 billion-gallon need has garnered some support. Automakers and motorists in high-volume fuel consumption areas like California and Florida, which are vulnerable to supply disruptions, believe it can increase the amount of ethanol available.

It's important to reiterate that ethanol's ability to fill a considerable percentage of Brazil's liquid fuels reservoir is what supports the largest FFV market in the world. Because ethanol can't fill that same percentage in the U.S. fuel supply, an extended line up of FFVs in the United States isn't feasible, some argue. GM says it would back any movement aimed at increasing the amount of ethanol for sale in the United States, but would not be specific when asked about its stance on the tariff. "We need more ethanol," Barthmuss says. "As that happens, we will be looking to add more passenger cars to our line up [of FFVs]."

It's the cultural differences, as well as the supply of ethanol in the United States, that cause distinctions between the FFV models offered in the two countries. "The large vehicles are simply what the American public is going for," Barthmuss says. "The driving patterns and consumer interest between the U.S. and Brazil are vastly different."

Barthmuss argues against the notion that meeting Corporate Average Fuel Economy (CAFÉ) requirements is the only motivation behind GM's "Live Green, Go Yellow" marketing campaign. "We've produced many more FFVs beyond our quota [for CAFE]," he says. CAFE is the "sales- weighted average fuel economy, expressed in miles per gallon, of a manufacturer's fleet of passenger cars or light-weight trucks with a gross vehicle weight rating of 8,500 pounds or less," according to the National Highway Traffic Safety Administration.

GM offers 16 FFV models in the United States, but they are the large SUVs and pick ups, like the Tahoe and Silverado. "These are the models where you get the most bang for your buck in the amount of oil reduced," Barthmuss says. "If you drive a new Tahoe [fueled with E85] 15,000 miles, you're going to use 120 fewer gallons of gasoline than if you drove a hybrid the same distance." This is because the hybrid uses a much higher percentage of gasoline compared with the FFV.

Honda doesn't offer any of its FFV models in the United States either. "There's just a much heavier demand for flex-fuel vehicles in Brazil," says Honda American spokesman Chris Martin. The company is interested in renewable fuels, however, and has labs around the world experimenting with hydrogen fuel cells, natural gas and ethanol. The Civic and Fit FFV models currently available in Brazil are the result of an "accomplishment" in technology, Martin says.

Production and Operations
Honda is a relative newcomer to the FFV industry in Brazil. GM and Fiat created a strategic alliance in 2000, with GM holding 20 percent equity in Fiat. The two companies have worked together, sharing powertrains and components. Fiat is the leading vehicle manufacturer and retailer in Brazil, selling 404,181 vehicles in 2006 compared with 344,943 vehicles in 2005 according to the Brazilian Motor Vehicle Manufacturers Association (BMVMA). GM has been producing vehicles in São Paulo since 1925. The automaker sold 374,071 vehicles in Brazil in 2006, the BMVMA says.

Fiat Automoveis, located in Betim, Brazil, is the Italian-based auto maker's most important manufacturing center abroad. Within the past few years, this facility, built in 1976, accounted for nearly 30 percent of Fiat's worldwide vehicle production. By the end of July, over 9 million vehicles were built in Betim, an accomplishment that coincided with the company's 30th anniversary in Brazil.
At Ford's San Bernardo assembly plant in São Paulo, a 4 million-plus square-foot facility where the Courier, Fiesta, Ka and F-Series trucks are built, the pace is riveting because of the skyrocketing demand for FFVs in Brazil.

Across town at the Taubate Engine assembly factory, the Zetec RoCam engine for the Fiesta and Ka are built. This four-cylinder engine, available in one and 1.6-liter versions is a staple for Ford production in Brazil, as it powers the Fiesta, a successful model in South America. An FFV version of the Ford Fiesta, introduced in 2002, was the first FFV offered to Brazilian consumers, Ford says. In December, Ford Brazil announced a new version of the EcoSport, which it says is the best-selling SUV in South America.

There are other models being produced in Brazil providing more variety to motorists. The Chevrolet Celta is equipped with a 1.0-liter FlexPower motor. The subcompact car is perfect for urban commuting, GM says. Ford's equivalent to the Celta, the Fiesta, is its highest-selling vehicle in South America, and the company says the one-liter engine is the most popular in South America. The GM engine generates 70 horsepower at 6,400 revolutions per minute. Also, the compact Montana pickup, is equipped with a four-cylinder, 1.8-liter FlexPower engine, generating 112 horsepower and averaging 35 miles per gallon on the highway.

Honda expects to expand the capacity of its automobile plant in Brazil to 100,000 units by mid-2007. This 1 million-plus square foot facility located in the São Paulo suburb of Sumare, focuses mainly on production of the Civic and Fit FFV models, which Honda started selling there in November. The Honda Fit has the following motor options: a 1.4-liter engine with intelligent dual sequential ignition and 80 horsepower in the LX. The sportier LXL is equipped with variable valve timing, lift electronic control, 16 valves and 105 horsepower.

Again, the market for FFVs simply isn't mature enough for Honda to offer its FFVs in the United States, Martin says, adding that the Japanese manufacturer sees much more of an opportunity with natural gas in terms of clean-fuel vehicle technology. This is because natural gas enjoys a massive "plumbing" infrastructure, providing cooking and heating oil to millions of U.S. homes. That infrastructure could be expanded to serve the transportation sector. At the same time, Honda remains active in researching different types of fuel, including ethanol, Martin says. "Honda is an expert in fuels," he says. "We believe that oil is a limited resource, and we want to advance the available options."

Nicholas Zeman is an Ethanol Producer Magazine staff writer. Reach him at nzeman@bbibiofuels
.com or (701) 746-8385.