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We like to think that when we deposit a dollar at the bank, it goes into a big vault and we can pull out that same dollar at any time. But that¿s not how the U.S. banking system works. Banks take that money and invest it to make money themselves, so cash gets spread around. This, naturally, leads to a big risk: What happens if those investments go sour? Well, you¿d be out of luck. You can¿t get your dollar back.
The Federal Reserve doesn¿t like that scenario, so it prohibits banks from putting all the cash it has on deposit on the line. In fact, the Fed forces banks to keep a portion of their assets at the Federal Reserve itself, to make sure that some of your assets won¿t get squandered if the bank¿s bets go south. These are called ¿reserves,¿ (hence, Federal Reserve. Got it? Good), and usually amount to 10% of the total cash kept in checking accounts.
These reserves are never exactly 10%, and banks like to keep a little extra in reserve ¿ not, as you might think, to make you more comfortable that they¿re in good financial shape, but rather so they can take that excess and lend it to other banks and make money off it. (They¿re banks, they can¿t help themselves.) The rate at which they make these loans is called the Federal Funds rate, which is set by the Federal Reserve¿s Federal Open Market Committee.
When you hear people chattering about how the Fed cut or hiked interest rates, this is what they¿re talking about: the interest rate banks can charge for lending money from their reserves. This begs the question: If these are essentially loans between banks, why is the Fed Funds rate so important for the rest of the economy?
Well, simply put, because loans make the financial world go round. Bank A lends Bank B $10,000 at a Fed Funds rate of 5%. Bank B then lends out $10,000 to a small business at 7%. The small business then takes that money and expands the business and hires new workers. Now someone is employed, Bank B has made interest off the loan, and Bank A is the richer for making it all happen. It¿s perhaps overly simplistic, but you get the idea. When you want the economy to thrive, you make lending cheaper.
Of course, sometimes you don¿t want the economy to thrive. In fact, you might want it to cool down, mostly to avoid money flooding the system and causing inflation. In that case, the Fed raises interest rates, making it difficult to lend or borrow.
Home / Markets / Industries / Industrials
Wednesday, May 07, 2008
Ford Accelerates Shift to Fuel-Efficient, High-Performance 6-Speed Transmissions
Comtex
DEARBORN, Mich., May 7, 2008 /PRNewswire-FirstCall via COMTEX News Network/ ----The big shift is on at Ford Motor Company (NYSE: F), as the automaker plans to more than double the number -- to 1.4 million -- of fuel-efficient, 6-speed automatic transmissions in its North American cars and trucks by the end of 2009.
The advanced transmissions provide customers 4 to 6 percent improved fuel economy compared with typical 4- and 5-speed gearboxes, as well as better acceleration and a quieter and more refined driving experience.
"Advanced six-speed automatic transmissions are an important element in our sustainability strategy to improve fuel economy for our customers and reduce greenhouse gas emissions by 30 percent in our new vehicles by 2020," said Barb Samardzich, vice president, Ford North America Powertrain Operations. "They also deliver improved acceleration and smoother shifting, all at a great value for consumers."
By the end of 2012, 98 percent of Ford's North American automatic transmissions will be advanced 6-speed gearboxes, maintaining the automaker's position as a leader of high-performance, fuel-efficient powertrains.
Less RPM, More MPG
Ford's newest 6-speed is the 6F35, which debuts in the 2009 Ford Escape and Mercury Mariner sport-utility crossover vehicles and replaces the current 4-speed. It also will be used in the 2009 Mazda Tribute, as well as two other vehicles early next year.
For 2009, the Escape and Mariner receive more powerful engines, but even with that improved power, they also increase their fuel economy by 1 mpg thanks to the new 6F35.
Key to the new 6-speed transmissions is increased gear span compared with 4- and 5-speeds. This allows vehicle powertrains to operate at a more optimum level, depending on the particular driving situation.
"For example, a higher first gear delivers more torque when accelerating from a stop while the deeper overdrive gear enables a vehicle's engine to use less energy at highway cruising speeds, which saves gas," says Phil Yuhasz, engineering director, Transmission and Driveline Engineering. "In addition, with two more gears, a 6-speed transmission allows the engine to operate at its optimum efficiency, for a greater period of time, further boosting fuel economy."
The 6F35 is produced at Ford's Van Dyke Transmission Plant in Sterling Heights, Mich., and will double the plant's production capacity to 1.3 million units annually. Van Dyke also assembles the 6F50 front-wheel-drive transmission. Last year, 221,000 6F50 transmissions were produced for the Ford Taurus, Ford Taurus X, Ford Edge, Mercury Sable and Lincoln MKX.
Quality Engineered
At 84.5 percent customer satisfaction, the 6F50 is three points above the industry average for all transmissions, according to the first quarter 2008 U.S. Global Quality Research System study conducted for Ford by RDA Group of Bloomfield Hills, Mich.
This year, 6F50 application expands to the all-new 2009 Ford Flex and Lincoln MKS. Available with SelectShift in the Lincoln MKS, the automatic transmission also allows manual gear selection for an engaging and sporty driving experience.
Flexible for Added Fuel-Saving Technology
Ford 6-speed gear ratios also play a key role in the company's new PowerShift dual-clutch transmission. Currently used in the new European Ford Focus and Ford C-Max, PowerShift combines the ease and permanent motion of a conventional 6-speed automatic transmission with the performance of a manual transmission. It also delivers a fast and sporty shift while maintaining excellent shift smoothness.
"These technologies are all about fuel economy," said Craig Renneker, chief engineer for new automatic transmissions, Ford Powertrain Operations. "And our advanced 6-speed transmissions will mate perfectly with the new Ford EcoBoost engines that are on the way."
Six-Speed Centers of Excellence
The Van Dyke plant will serve as the company's global center of excellence for 6-speed front-wheel-drive transmissions, and the Livonia (Mich.) Transmission Plant will assume the same role for rear-wheel-drive versions.
The third center of excellence for Ford's 6-speed manufacturing is its Sharonville (Ohio) Transmission Plant, which produces gears and other transmission parts for the Livonia and Van Dyke facilities.
A total investment of $658 million in the three plants was announced last year, primarily for new flexible equipment to produce advanced 6-speed transmissions.
SOURCE Ford Motor Company
http://www.ford.com
Copyright (C) 2008 PR Newswire. All rights reserved
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