In an op-ed in The New York Times this morning, Thomas Friedman derides Toyota for not supporting tougher mileage standards for autos.
Assisting Detroit’s suicide seems to be contagious. Everyone wants to get in on it, including Toyota. Toyota, which pioneered the industry-leading, 50-miles-per-gallon Prius hybrid, has joined with the Big Three U.S. automakers in lobbying against the tougher mileage standards in the Senate version of the draft energy bill.
Friedman believes that the lack of small, fuel-efficient cars is what is causing the ongoing decline of the "Detroit Three."
Michigan lawmakers year after year shield Detroit from pressure to innovate on higher mileage standards, even though Detroit’s failure to sell more energy-efficient vehicles has clearly contributed to its brush with bankruptcy, its loss of market share to Toyota and Honda — whose fleets beat all U.S. automakers in fuel economy in 2007 — and its loss of jobs. G.M. today has 73,000 working U.A.W. members, compared with 225,000 a decade ago. Last year, Toyota overtook G.M. as the world’s biggest automaker.
Which is fundamentally flawed. GM, Ford, and Chrysler do market fuel efficient vehicles. Perhaps not as efficient as a Prius or Civic hybrid, but still very efficient. The differentiator in the consumer purchasing decision is quality, reputation, and value. Value is defined from the perception of the customer, not the government. Value includes price, operating cost, design, features, and even the dealer and purchasing experience.
Now why would Toyota, which has used the Prius to brand itself as the greenest car company, pull such a stunt? Is it because Toyota wants to slow down innovation in Detroit on more energy efficient vehicles, which Toyota already dominates, while also keeping mileage room to build giant pickup trucks, like the Toyota Tundra, at the gas-guzzler end of the U.S. market? Deron Lovaas, vehicles expert at the Natural Resources Defense Council: “Shamefully, Toyota has joined forces with older automakers that are getting their lunch handed to them in the marketplace, in part because they’ve consistently shunned fuel efficiency.”
Toyota, creator of the Prius, obviously hasn’t "consistently shunned fuel efficiency." And truck/SUV sales are falling as consumers shift toward more efficient vehicles. As Friedman himself points out, Toyota already has vehicles that can exceed the high end of the proposed standards.
Don’t be fooled. Japan and Europe already have much better mileage standards for their auto fleets than the U.S. They both have many vehicles that could meet the U.S. goal for 2020 today, and they are committed to increasing their fleet standards toward 40 m.p.g. and above in the coming decade. So Toyota, in effect, is lobbying to keep U.S. standards — in 2022 — well behind what Japan’s will be. Representative Edward Markey said to me that Toyota could meet a 35 m.p.g. standard in Japan and Europe today, “but here — even though they bombard Americans with ads about how energy efficient Toyota is — they are fighting the 35 m.p.g. standard for 2020.”
Friedman sees just one side of the equation… the regulatory stick. Toyota sees the other side: the consumer and even (egads!) government-driven carrot. Value from the perception of the customer. And that’s why he can’t seem to grasp why statements like the following are true.
Irv Miller, a Toyota vice president, used the company’s corporate blog to refute charges that it is “trying to move America backward on gas mileage.” “Nothing could be further from the truth,” he said, because Toyota also favors improved mileage standards.
Toyota invested in the Prius because they saw customer value. They didn’t need a stick. Europe and Japan have higher standards driven by higher gas prices… so customers see value in efficent cars. The Detroit Three have been investing in failed (so far) attempts at highly efficient vehicles because they’re afraid of the stick. A highly efficient vehicle that is poorly designed and comes with an abusive sales experience holds lower customer value than a highly efficient vehicle that also delivers quality, design, and support.
That lack of focus on customer value is what’s killing Detroit, not the battle against increased CAFE standards.