Dear Friends of Azure,

Azure Dynamics CEO Scott Harrison was asked by The Wall Street Journal to comment on President Barack Obama's announcement yesterday that all vehicles purchased by the Federal government must be alternative fuel, including hybrid electric and electric, effective 2015. The Federal government operates a fleet of more than 600,000 vehicles, replacing 60,000 - 70,000 annually.


Mr. Harrison was also quoted in an extensive article on the President's announcement on the Bloomberg News wire. Both stories are below.


Sincerely,


AZD



Wall Street Journal:
Azure Sees Energy Plan Spurring Hybrid Vehicles


By Mike Ramsey


President Obama's promise to dramatically increase the U.S. government's purchasing of hybrid and electric vehicles represents a significant opportunity for companies pushing ahead with zero-emission vehicles, said Scott Harrison, chief executive of Azure Dynamics Corp.


Azure creates hybrid and all-electric powertrains and installs them into existing vehicle bodies made by Ford Motor Co. It produces the Transit Connect Electric commercial van as well as medium-duty hybrid delivery vehicles based on Ford's E450 chassis.

"It can't be overstated how important it is to us," Mr. Harrison said. "We have reasonable interest from the government and certainly the Department of Defense has some initiatives for non-tactical vehicles that fit our world. What has been lacking has been a uniformed vision, which this seems to resolve."


The president's announcement could speed the sales and ideally lower the costs of producing hybrid and all-electric vehicles. Companies including General Motors Co. and Nissan Motor Co., have released or plan to sell electric vehicles that could be used by the government.


Mr. Obama on Wednesday promised that the federal government will, by 2015, purchase only alternative-fuel vehicles, such as hybrid and electric cars. It is unclear how a mandate would be implemented across the federal fleet, which involves dozens of government agencies and a range of vehicle types from cars to heavy trucks.


Azure is planning to build about 700 hybrid vehicles and as many as 800 Transit Connect models this year. The company has estimated its revenue to be between $52 million and $68 million and Mr. Harrison said the company's orders to date are on track.


Azure, based in Oak Park, Mich., posted a loss of $10.8 million, or two cents a share, for the fourth quarter of 2010 compared to a loss of $8 million, or two cents a share, in the same quarter a year ago.


Mr. Harrison estimated that a sweeping government mandate to purchase hybrid vehicles or all-electric vehicles for the federal fleet, which stands at about 600,000 vehicles today, could translate into the potential for as many as 10,000 sales to Azure Dynamics.


"We see price breaks on volume at every 1,000 to 2,500 vehicles we make," he said. "When you start talking about 10,000 units, it has a snowball effect in terms of driving the price down."


Azure earlier this year announced an order for 600 hybrid-electric delivery vans from Purolator Courier Ltd. over three years.




Bloomberg:
Ford May Gain Most From Obama's Goal of Buying Only Green Cars


By Angela Greiling Keane


March 31 (Bloomberg) -- Ford Motor Co., the only major U.S. automaker to not receive a government bailout, may gain the most from President Barack Obama's push to require the government to buy only alternative-fuel vehicles by 2015.


The company's fleet and production plans will help it benefit as the U.S. ramps up purchases of cars and trucks that use fuels including electricity and natural gas, said Brett Smith, an analyst at the Center for Automotive Research. The General Services Administration, which owns about one-third of the federal government's fleet, said 49 percent of its vehicles already run on alternative fuels.


"Ford is very well positioned among the U.S. automakers for using the full technological basket," said Smith, who analyzes the market for alternative-energy vehicles at the Ann Arbor, Michigan-based research center.


As part of a plan to lower energy costs and increase the use of domestic power sources, the government should be buying only alternative-fuel vehicles within four years, Obama said in a speech yesterday in Washington. Those could include electric, hybrid-electric, natural-gas, clean-diesel and flex-fuel vehicles that use E85, a fuel that is 85 percent ethanol.


Ford, the first U.S. automaker to sell a gasoline-electric hybrid vehicle, has three hybrid vehicles and one electric plug- in on the market and plans to sell four more in North America by 2012, Susan Krusel, a spokeswoman, said in an e-mail. Ford plans to have seven E85 models, which can also use gasoline, in 2015.


Hybrids, SUVs


Ford last year passed General Motors Co. as the biggest vendor of vehicles to the U.S. government, partly on the strength of Obama administration purchases of its hybrid cars and sport-utility vehicles.


"Ford is a leader in this area, having invested billions in researching and developing new fuel-efficient products, alternative fuel options and electrified vehicles," Pete Lawson, Ford vice president of government affairs, said in an e- mail. Ford has four models that get at least 40 miles to the gallon, more than any other full-line automaker, he said.


The U.S. government has a fleet of about 600,000 vehicles, and buys 60,000 to 70,000 automobiles annually through the GSA.

The agency bought 406,679 vehicles in the past six fiscal years, or about $8.59 billion worth of cars, trucks, fire engines and ambulances, according to data obtained under a Freedom of Information request.


E85 Pumps


The government should avoid vehicles that use E85, because they can run on gasoline if the ethanol-based fuel isn't available, said Jim Kliesch, senior engineer for the Union of Concerned Scientists' clean-vehicles program in Washington.


"Flex-fuel vehicles are not a good solution unless you have pumps in place to fuel the vehicles," Kliesch said in an interview. "The president should make sure the fleet purchases aren't just packed with FFVs, to make sure they include a lot of hybrids and plug-ins."


The federal government should start with a pilot project to lease 100 electric plug-in vehicles, because the current purchase price is higher than what the government is allowed to spend, GSA Administrator Martha Johnson said at a Senate hearing yesterday.

The government's business will spur sales among companies and consumers by lowering prices for alternative-fuel vehicles as production and sales volumes increase, said Dick Cupka, Ford's commercial-vehicle sustainability program manager.


Volumes, Prices


"Showing government leadership with green fleets is a great way to get volumes up and prices down," said Roland Hwang, the San Francisco-based director of the Natural Resources Defense Council's transportation program.


Government use will help expand the alternative-fuel infrastructure, another element in consumer demand, Cupka said in an interview. Fueling infrastructure may include E85, compressed natural gas, hydrogen or clean diesel at fueling stations or electrical outlets for recharging plug-in vehicles.


"As more people buy the vehicles, there's more demand for the fueling stations," Cupka said. "It's a chicken-and-egg situation. More infrastructure leads to more customers and more customers lead to more infrastructure."


Other beneficiaries of the shift in government purchasing may include suppliers of components like electric-drive power trains, such as Azure Dynamics Corp.


"It's hard to overstate what 600,000 alternative-fuel vehicles would do for alternative power trains," Scott Harrison, chief executive officer of Oak Park, Michigan-based Azure Dynamics, said in an interview. The company, which supplies power trains for Ford's Transit Connect delivery van, in turn uses Johnson Controls Inc. to supply batteries and Borg Warner Corp. and Siemens AG for other components, he said.


Focusing on Electrics?


While Obama "talked about ethanol-powered vehicles and biodiesel" yesterday, the administration seems to be focusing on electric vehicles in the short-term, Mike Omotoso, senior manager of the global power train section of consultant JD Power & Associates, said in an interview.


Obama in his State of the Union address in January reiterated his goal of putting 1 million advanced-technology vehicles, such as plug-in and hybrid electrics, on U.S. roads by 2015. In his budget proposal in February, he called for ending a clean-diesel grant program and cutting research for hydrogen fuel-cell vehicles.


"If the ultimate goal is to reduce dependence on oil, whether the source be foreign or domestic, we should be looking at all kinds of vehicles, not just electric," Omotoso said.


Electric-car makers include Detroit-based GM. The company has 19 models that use alternative fuels, which may account for 40 percent of U.S. production this year, said Sharon Basel, a spokeswoman. By the end of 2012, GM wants 50 percent of the vehicles it assembles in its home market to use alternative fuels, she said.


Twelve of the Chrysler Group LLC's vehicles have engines that can run on E85 fuel, Vince Muniga, a Chrysler spokesman, said. Chrysler's goal is to have 50 percent of its fleet able to run on alternate fuels by the end of 2012, he said.


GM reorganized in bankruptcy in 2009 with $49.5 billion in government aid, while Chrysler got $12.5 billion in assistance for its reorganization that year.