Throwing fuel on the fuel-economy debate

How often do GM and Toyota get into a public argument with a Pulitzer-prize winning author, using the blogosphere as their battle-ground? It all started when Thomas Friedman, author of the globalization classics Lexus and The Olive Tree and The World Is Flat, wrote an op-ed piece for the New York Times titled Et tu Toyota?, taking the company to task for its duplicity in joining the Detroit big-three for lobbying against higher fuel-economy standards in the US, while publicly cloaking itself in the language of eco-friendliness when it comes time to hawk hybrids on TV.

Toyota PR machinery kicked into high-hear and soon Irv Miller, group VP of communications had a response posted on the company’s external facing blog. General Motors also took offense at the allegations, and joined in the fray with a post of their own on the GM blog, appropriately borrowing Shakespearean title from Julius Ceasar: Beware the Ideas of Friedman. (Perhaps they could have waited until March in deference to the theme?) And there are just the “official” participants– bloggers have been actively writing about the problem.

Here is the quick run-down of the argument:

  • Friedman questions why Toyota is fighting against fuel-economy standards in the US, since their fleet already complies with the higher ones in Europe and Japan. Detroit is in a different boat, as their primary market is US and their production is  heavily weighted towards light trucks. Precisely for that reason, higher CAFE standards place GM/Ford/Chrysler at a disadvantage while favoring the imports which do need to costly adjustments to the new regime. The puzzle is why sheer self-interest did not lead Toyota to lobby in favor of higher standards.
  • The answer implied in the article: because that would leave significant revenue on the table since large-trucks and SUVs constitute a big slice of the US market. It’s not uncommon for a large company with diversified product lines to demonstrate schizophrenic behavior– one side going after the “green” niche while another seeks to capitalize on gas-guzzlers. No surprises there.
  • Irv Miller counters that Toyota is pushing for higher standards but not the most aggressive version described in the senate bill because it is unrealistic:

“It’s because there’s a point at which the bar is set too high for all competitors.”

  • Both the Toyota and GM responses counter that the reason large trucks are built is because the large trucks are bought by consumers- effectively a syllogism that amounts to “we sold them because they bought them.”
  • Similarly this line makes no sense:

It’s why our full-size pickups are the fuel economy leaders. It’s why our new Chevy Tahoe and GMC Yukon Hybrids match the city fuel economy of a Toyota Camry.

The fact that one model can beat a competitor doesn’t give GM a “green heritage” anymore than the fact that the Viper can hang with a Ferrari give Chrysler a “Formula 1 heritage” across the line up. Existential proofs are useless because environmental impact is about total emissions across the board. The “A” in CAFE stands for average, not some best-case scenario achieved by prototypes in a controlled lab experiment or niche model driven by a few hundred people.

  • There is a deeper concern raised by Friedman which is not answered in the GM retort. NYT article refers to Michigan reps’ attempt to lobby against CAFE standards on behalf of auto-manufacturers a case of “empty-barrel politics” and corporate euthanasia– effectively hastening the decline of the US industry. This is a far more damning and bold accusation. Putting on the McKinsey consultant hat, Friedman is dropping a hint that management has been clueless and their long-established strategy of abandoning the small car segment to imports has driven the industry into the ground. (The reasons for the decline may be debatable but its existence is certain. Last year Toyota quietly surpassed GM to become the world’s #1 manufacturer.)
  • Finally the engineering creed of “doing more with less” is missing from the whole debate. There is undeniably a trade-off between vehicle size and fuel efficiency, but there is nothing that precludes improvements across the board. Even today wide difference exist in the fuel efficiency for vehicles in same size, weight and performance categories. In fact one could argue there is a greater burden to improve fuel economy in that segment. There is no reason that tricks applied to  optimize small cars today (multi-valve engines, variable timing, use of lighter metals in construction, aerodynamics, hybrid drive-trains etc.) could not be employed elsewhere.


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