As part of their initiative, Ford and GM are intensifying marketing of "flex fuel" autos to position themselves as both environmentally friendly and patriotic for reducing the U.S.'s dependence on foreign oil. Production of such cars and trucks is still expected to be small; the two companies plan to make 650,000 autos this year that can run on E85. However, the automakers are also pushing for an expansion in the number of fuel pumps offering the ethanol blend. The campaign may have some impact, but Toyota
In the end, Ford and GM's more emphatic promotion of ethanol will probably be more beneficial to ethanol producers like Archer-Daniels-Midland
To be sure, any near-term demand increase probably won't be huge, since only the most fervent environmentalists and patriots are likely to turn to E85. That's because cars and trucks are 25% less fuel-efficient when running on ethanol vs. gasoline. Even with lots of government subsidies, ethanol is still only somewhat cheaper than gas.
Detroit's embrace of E85, though, will help solidify the long-term position of ethanol as an alternative fuel. Ethanol already has the backing of politicians from the farm states, and their support for the corn-based fuel can only increase as pressures rise to reduce agricultural subsidies. With Detroit also on board, firms like ADM and MGP can rest assured that the future of their ethanol business is bright.
Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
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