• Did the Japanese Government Fund the Toyota Prius?

Did the Japanese Government Fund the Toyota Prius?
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Toyota, rather adamantly says “no.” At least, that word is used in their statement.

But someone who should know says, equally adamantly, “yes.”

That someone is none other than James Press (pictured), now the vice-chairman and president of Chrysler. But, before that job, he spent 37 years at Toyota, and ended up running their United States operations and sitting on the Japanese car maker’s board of directors.

According to comments made by Press to Business Week magazine, the Prius development costs were paid for by the Japanese government, in their entirety. Press is quoted by BW as saying, “The Japanese government paid for 100 percent of the development of the battery and hybrid system that went into the Toyota Pirus.”

Toyota’s response? “I can say 100 percent that Toyota received absolutely no support – no money, no grants – from the Japanese government for the development of the Prius.” That’s the word from Paul Nolasco, a Toyota spokesman.

So, who’s telling the truth?

Maybe both. Toyota’s comments referred to “development of the Prius.” Press refereed to “development of the battery and hybrid system that went into the Prius.” There is a difference between those two statements, one that’s subtle but substantial. Moreover, Toyota’s comments do not exclude the very real possibility that money was funneled to another company working in partnership with Toyota. (For example, Toyota’s apparently failed lithium ion battery package was being developed for them by Panasonic.)

Links between Japanese industry, government, and banking are long-standing and tight. Interlocking ownership, in which ostensibly rival companies own shares of their competitors and banks also hold ownership interests in competitor companies and lending institutions, are part of the Japanese corporate structure. Even World War Two’s defeat didn’t fundamentally alter that reality. Moreover, the Japanese government has consistently sought to shore up Japanese industrial companies, frequently through monetary policies designed to allow banks to inflate the actual value of their assets.

If the Japanese government really did fund the development of the nickel hydride battery and hybrid powertrain used in the Prius, it would raise some nasty questions, questions that the Detroit automakers probably would like to see addressed.

In the view of some industry observers, Toyota has a history of “dumping,” though it’s never been established that the company is guilty of doing it. “Dumping,” in international trade, is the practice of selling a product below cost in order to establish market share and crowd out competitors. Some who have studied the entry of Lexus into the United States auto market firmly believe that Toyota dumped the brand in the U.S. for at least five years after its introduction.

Dumping is, of course, a fairly save offense, particularly with a product as complex as an automobile and an industrial systems as closed as that of Japan. Since the predicate of the offense is selling below cost, the definition of cost is crucial. Anything that shifts some of the development expense away from the manufacturer allows it to maintain a lower cost. So, proof that the Japanese government, in effect, subsidized the development of the Prius could have serious political repercussions.

Oddly, Press’s remarks must be welcome news to Bob Lutz at General Motors. Last week, Lutz told reporters at the New York Auto Show that GM made a mistake when it didn’t introduce a hybrid vehicle at the time it had the technology to do so. He blamed the company for failing to produce the car, even at a loss, and now having to play catch-up to the Prius in the market. He also offered that “mistake” as an excuse for producing the Chevy Volt at a loss to GM’s shareholders.

Press’s remarks make GM look better that Lutz’ own explanation. GM’s “mistake” may have been a calculation made in good faith, without a complete understanding of the financial support being provided by the Japanese government. Had GM’s development costs been paid by the United States government, no doubt it would have viewed the profit potential for a marketable version of the EV1, for example, somewhat more positively.

Is Press telling the truth?

Bet on it.

Ralph Kalal
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  (47) posted on 04.4.2008

Yet another rant about Toyota.

Chrysler released a statement to clarify Press’ comments. In the press release Chrysler stated that the Japanese government worked in cooperation with the Japanese industry in battery development. Key word is INDUSTRY not just Toyota. This means that ANY Japanese company (whether it be automaker or simply an electronics manufacturer) could have benefited from such government assistance.

But of course, you’ll never tell that side of the story will you Ralph?

BTW only the most biased anti-Toyota readers will buy that idiotic excuse of how "dumping" is related to this story. It’s a commentary that no professional journalist would ever make.

  (4) posted on 04.2.2008

And why should we bet on Press telling the truth? Is there tangible evidence that the Japanese government funded the Prius, other than Press’s words? Sure, he may have been a top exec at Toyota, but the fact of the matter is, he’s now employed by a rival manufacturer. And given the dire situation over at Chrysler and the bad publicity it has been receiving, it’s perhaps Press’s words and not Toyota’s that should be taken in with a grain of salt.
Moreover, what if the Japanese government funded the Prius? Government funding for scientific and engineering research conducted by private companies is common all over the world. If the Japanese government did indeed fund the Prius, I think they, along with Toyota, should be thanked and not criticized for helping develop and release the first mass market hybrid car (I say mass market, because the Insight was a compromised vehicle directed towards limited audience, not towards your average family). Whether the Prius is indeed environmentally friendly and economic may be up for debate, but is cannot be denied that Toyota and the Prius has heavily influenced the auto industry and its stance on environmentally friendly, alternative fuel vehicles.
And finally, in selling the Volt at a price lower than its actual cost, isn’t GM attempting to carve out its own market share despite incurring a loss? Selling a vehicle below its actual cost...sounds an awful lot like "dumping" to me.

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