Did the Japanese Government Fund the Toyota Prius?
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.