Friday, November 14, 2008

Meanwhile, In Japan

Because the domestic auto industry's situation is unique, and car manufacturers wouldn't be in this situation if they only built more cars like the Prius, right?
Plans to make the Toyota Prius at the carmaker's new U.S. plant in Mississippi are being reviewed by a new emergency task force charged with propping up the company's profits.

U.S. production of the Prius, originally scheduled to begin in 2010, could now be pushed back to 2011 or later, Japan's Nikkei newspaper reported November 14, without citing sources.
Okay, but if had the domestic auto manufacturers focused on quality, smaller, more fuel efficient vehicles, or didn't have so many UAW plants, they would still be rolling in dough, right?
The task force, chaired by President Katsuaki Watanabe, was formed after Toyota booked an operating loss in North America for the first half and slashed its full-year earnings forecast.
What this illustrates is not that the Big Three have been unduly criticized for their bad management and poor strategies. It highlights how, in an economic downturn, even the best run companies can lose money. And how nothing the critics of an auto industry bailout are advocating is likely to quickly, and perhaps not even slowly, turn around the plight of domestic auto makers. Not even if Toyota handed them its hybrid technology and the keys to its Mississippi manufacturing plant.

Meanwhile, let's keep in mind that the Big Three have a point, in that a lot of domestic auto buyers really do want a huge, overpriced, gas guzzling SUV sitting in their driveway. Gas prices are down this month? Do I even need to tell you what that means, or have you guessed - SUV sales are up. If not for the economic downturn, burst housing bubble and credit crunch, the Big Three would probably be seeing SUV sales figures as high as last year's, as if the summer's record gas prices never happened.

Although the Big Three have improved their quality over the past few decades, they still lag behind major foreign auto manufacturers. I don't want to understate the importance of their ceding short- and (moreso) long-term quality to companies like Honda and Toyota. But there's something else to keep in mind: One of the reasons that auto manufacturers coming out of Europe or Japan build compact, fuel efficient vehicles is that's what their domestic consumers want. It's what we want when gas hits $4/gallon - prices comparable to those long seen in Europe or Japan? Is that supposed to surprise us - we truly believed Europeans and Japanese to be alien creatures who love packing themselves into tiny cars? Are we supposed to be surprised that gas prices hit the $4 mark and, despite the current drop, are going to hit and exceed that mark in the future?

The myopia here is not just out of Detroit - far from it. Congress worked hand-in-hand with domestic auto makers to create the context for this crisis. You know what might have forced the Big Three to develop a business model that is more realistic in a world of $4/gallon gas? Not carving out dishonest exceptions from CAFE standards to avoid classifying SUV's as passenger vehicles.

The very same members of Congress who are presently blocking a bail-out are the ones who happily went along with that deceit, concurred with Dick Cheney's notion that doing otherwise would somehow destroy an American way of life in which consumption is king and conservation is for wusses is a "personal virtue", and gleefully chanted "drill, baby, drill" during the presidential race. They're they types who giggled along with caricatures of "Prius-driving liberals". They were backed up by pundits like George Will, who would happily regurgitate any anti-hybrid propaganda, no matter how absurd, such as the fabrication that a Prius costs $3.25 per mile over its lifetime, while a Hummer costs only $1.95. And now they're lecturing the auto industry that they should have been leading the hybrid race? Or that the Big Three exemplify a failure of leadership? Or that they know more about these issues than, say, heads of cabbage? (Not that those who favor the bailout are necessarily any better.)

I know, I know. Building an economy propped up by debt-driven consumer spending and low energy prices was "the free market at work", and preparing for an inevitable future of higher energy costs or reduced credit would have... somehow... been wrong, even if it might have diminished or prevented the present collapse of the economy.


  1. Ok, I started reading the G. Will article that you posted, but my eyes started to bleed.

    I do remember reading/hearing something about how the hybrids' engines are environmentally bad to make. I am not sure if that is true and even if so, I wonder if other engines are just as bad to make!

    Really wishing I could afford a hybrid,

  2. George Will embraced figures that a Prius would last only 109,000, and would cost $3.25 per mile to drive - or $354,200 over the lifespan of the car. So if you by the Prius for, let's say, $24,200 (not a base model, but not fully loaded), and drive it 13,476 miles per year, it lasts eight years. So Will has a Prius owner paying $41,250 per year for gas and maintenance. Either that, or he imagines that Toyota is taking a six figure hit every time it sells a Prius. Pure fiction.

    But there is something to hybrid technology being environmentally bad to manufacture. NiCad batteries rely upon nickel (and, obviously, cadmium), and nickel mining and smelting isn't environmentally friendly. The Chevy Volt is supposed to use Lithium Ion batteries, but the current generation of hybrids are built based upon battery technologies that exist, and I believe some advances still must be made before LiOn is viable even for a plug-in hybrid. On the other hand, hybrids are much cleaner to operate.


Note: Only a member of this blog may post a comment.