Posted by: David Kiley on April 2, 2008
Did former Toyota executive James Press rat out his old company? Or was he just pointing out how smart the Japanese were to back gas-electric hybrid technology, which has been a boon to the company’s fortunes and image, especially in the U.S.
Chrysler LLC vice chairman Press said Wednesday that he was not intending to speak negatively about Toyota when he told BusinessWeek that the Japanese automaker benefited from government investment in its gas-electric hybrid technology.
Press was responding to a statement made by Toyota, where the Chrysler executive worked for 37 years and served as a board member before leaving last year, denying Press’s assertion made in an interview with BusinessWeek on March 20 that the Japanese government had subsidized “100% of the research and development costs” of the automaker’s gas-electric hybrid system that was launched in the 1997 Prius and now powers all of Toyota’s hybrid vehicles.
In a wide-ranging interview with Businessweek editors and two correspondents that also included Chrysler LLC CEO Robert Nardelli and vice chairman Tom Lasorda, Press said on-the-record, “The Japanese government paid for 100% of the development of the battery and hybrid system that went into the Toyota Prius.” He did not specify the forms those investments took. But the statement contradicted those made by Press when he was a Toyota employee.
Toyota refutes Press’s claim. “I can say 100 per cent that Toyota received absolutely no support - no money, no grants - from the Japanese government for the development of the Prius,” said Toyota’s Tokyo-based spokesman Paul Nolasco.
In a statement by Press released through a spokesperson, he doesn’t refute what he said to BusinessWeek on March 20. “The Japanese government strongly supported R & D (research and development) investment in battery development, and the Prius and other Japanese models benefited from that investment.” He cited this “investment” as an example of cooperation for the U.S. government and industry. “Instead of being at odds with each other over CAFE [Corporate Average Fuel Economy] and other policies that put U.S. companies at a disadvantage, the two should work together to find technological improvements that help give U.S. companies a competitive advantage,” said Press.
Press, through a spokesperson, would not clarify what he meant by “support” or “investment.” The Japanese government, for example, has long supported technology initiatives to lower tailpipe emissions and increase fuel economy to lessen smog in its crowded cities through consumer tax incentives. Japan’s “Green Taxation” system, for example, gives consumers a tax credits to purchase low-emission vehicles to offset a portion of sales tax paid on a new car, a system similar to consumer tax incentives in the U.S. to buy hybrids and electric vehicles.
In the interview with Businessweek, Press was clearly talking about direct subsidy by the Japanese government, not consumer tax credits. I stand by my account of the story, as does BusinessWeek.
Press’s assertion to BusinessWeek, said Toyota’s U.S. spokesman Mike Michels, contradicts statements Press gave to media while he was an executive at Toyota. Michels acknowledged that the question of Japanese government incentives has been asked from time to time by reporters because U.S. automakers have long alleged that such subsidies gave Toyota an unfair cost advantage over U.S. automakers in developing the Prius.
Press, noted Michels, also told the House Committee on Energy and Commerce last year that Toyota received no R&D subsidy for its hybrid technology. In a hearing, titled, “Climate Change and Energy Security: Perspectives from the Automobile Industry,” on March 14, 2007, Press testified: “The development of the program itself was about a 7-year project when we got into production. The concept of a hybrid, though, goes all the way back to the 1900s. It’s technology we’ve been working on for a very long time.”
Because there is disagreement in Congress and in the federal government over the levels of financial support that should be given to automakers and consumers to advance low-emission and high-fuel-economy vehicles, Press was specifically asked by Rep. Michael Burgess (R-TX) if research and development for the Prius was funded by the Japanese government. Press’s response: “No, sir.”
In the interview with BusinessWeek, Press explained that Toyota’s gas-electric hybrid system was originally developed for the Japanese market, and funded by government investment. The U.S. was a secondary market for the car, but one that proved more successful than Japan where hybrids have been slower to catch on.
Why is this question of direct investment by the Japanese government such a big issue?
There has been enormous tension between U.S. automakers and Toyota over gas-electric technology. The U.S. auto industry has spent billions of its own money, as well as government grants, pursuing electric cars that run on batteries, as well as those that run on hydrogen fuel cells.
U.S. automakers dismissed gas-electric hybrid systems in the 1990s, writing them off as too expensive and inefficient. Toyota, though, pressed the technology, turning the Prius into a sales and public relations phenomenon. Toyota is the world-wide leader in hybrid vehicle sales and, on the back of the Prius, is widely viewed by the public as the “greenest” car company in the industry. U.S. auto executives have long maintained the only reason Toyota was able to bring its hybrid vehicles to market without losing billions was because of government subsidies.
A large part of Toyota’s Prius narrative has been that it developed the system entirely on its own, and that it had no unfair advantage over Detroit. Press’s remarks to BusinessWeek, while not detailing what forms those subsidies took, contradicted that.