A Rough Week for Hybrids

December 20, 2008

The week of December 15 started out with grim news for hybrid production, and didn’t get much better.

Toyota Delays US-Prius

On Monday, Toyota announced that it had indefinitely postponed plans to build the Toyota Prius at a new factory currently under construction in Blue Springs, Miss. Just a few months ago, the Prius was on a roll, with gasoline prices topping $4 a gallon. As sales soared, Toyota switched the $1.3 billion Miss. plant’s output to the iconic hybrid from its original product: Highlander sport-utility vehicles. Toyota insisted that the plant will remain dedicated to building Priuses, whenever the project is finally restarted.

Audi Kills Q5 Hybrid

On the same day, Audi announced that its plans for a gas-electric version of the Q5 are also indefinitely on hold. The company had previously flirted with the idea of a Q7 hybrid, but scrubbed those plans. Senior sources at the company said, “Audi won’t produce a petrol-electric hybrid until we can make nickel metal hydride batteries safer in crash situations, and hybrid technology more efficient overall.”

Th!nk Holds on for Life

On Tuesday, electric carmaker Th!nk appealed to the Norwegian government for loan guarantees to weather the current economic crisis. The company’s request was denied.
The government funding could have enabled Th!nk to stay on track for launching the Th!nk City, a zero-emission micro car, in European and US markets in the next year or two. Richard Canny, Th!nk’s chief executive officer, said, “We are in a very serious situation.” One day later, Mr. Canny said that events were “changing quickly” and that government funding remained a possibility.

GM Delays Volt Engine Factory

On the same day, General Motors announced that it will delay construction of a factory in Flint, Mich., where the engine for the Chevrolet Volt plug-in hybrid sedan was to be made. Two days later, Jon Lauckner, vice president of global program management, reassured Volt fans that the project remained on schedule. “It is one of the highest, if not the highest, priority programs in the company and that hasn’t changed, nor has the commitment of resources to fund it,” said Lauckner on GM’s corporate blog. “We have more confidence than ever the Volt will start production as planned in late 2010.”

Chevrolet Volt

Chevrolet Volt

The Broader Context: Plant Closings and Bailout Money

On Wednesday, Chrysler said that it is closing all 30 of its manufacturing plants for a month starting Friday as it tries to weather the economic downturn. (In October, Chrysler had announced that on December 31 the company is closing the Newark, Del. assembly plant where its only hybrids, the Chrysler Aspen and Dodge Durango, are made.) Ford said it would also extend holiday shutdowns in almost all of its assembly plants, but not the Kansas City facility where the Ford Escape Hybrid is produced.

Finally, after the week of bad news, on Friday, the US federal government came through with $13.4 billion in loans to General Motors and $4.0 billion to Chrysler under terms similar to those Congress considered last week. The funds will be provided by the US Department of the Treasury from the $700 billion TARP (Troubled Asset Relief Program) package.

Under the terms of the package, automakers have three months to put restructuring plans into place, which will include placing a greater emphasis on advanced fuel-efficient cars.


Posted in Carmakers, News
Tagged as

Related Readings

2012 Lexus LS 600h L

2012 Lexus LS 600h L

When the Lexus LS 600h L (L for long wheelbase) arrived in 2007 as a 2008 model, it was the first car to combine a
  • Anonymous

    “General Motors announced that it will delay construction of a factory in Flint, Mich.”

    Wait a second, a car company on the verge of failure was considering building a new factory? How about retooling an existing one. Why was a new factory even an option to begin with? I think there are already enough abandoned factories in Michigan, no need to create another one.

  • Ross Nicholson

    Instead of lowering executive and worker pay at domestic automakers, we should increase executive and worker pay at foreign manufacturing plants in the USA to create the level playing field. We need to put more money in people’s pockets, not less, in this deflationary period. The government could help out the foreign manufacturers, look at Canada, they did it for us! Good old Canada. Toyota has had a loss for the first time, we can help the Japanese and Germans with plants in the USA to bring their American workers up to union scale pay and benefits.
    Auto workers in the United States are the world’s best, qualified to do wonders. We need to see that working people suffering due to no fault of their own (the auto industry) gets preference over bailing out wealthy unsympathetic bankers, who suffer only by the fault of their own doing.

  • Samie

    Ross Nicholson as a good heart but somewhat old ideals. This is not the same economy that was in your dad’s or grandpa’s generation. We live in a ever increasing global economy like it or not companies don’t have as much control over what consumers buy. No longer can a company like GM rely on owner loyalty. Like others, I hope the Big 3 survives but there will be more competition from foreign automakers in the years to come even if the Big 3 produces the best cars out there. Being a leaner more focused company will allow them to compete in this century and to the delight of most who view this site, they will actually be able to focus on smaller vehicles as part of their profit strategies. Why inflate worker salaries? Don’t people blame folks like GM for relying on the monster SUV’s to show profits? Also why make foreign companies pay the same wage rates as the Big 3? I’m not a conservative by no means but that approach seems like a protectionist idea as as opposed to spurring new innovation and competition.

    Many economist are saying that a full recovery from the economic conditions may take 1-3 years. This is why the auto industry has cooled their plans for production. Eventually some forms of hybrid technologies need to be mandated especially in the luxury sector if we want to get serous about this instead of playing the dumb game of freaking out over gasoline highs and lows.

  • AP

    The way to encourage hybrid development is not with mandates, because that doesn’t ensure a market for them (just supply). They have to be profitable.

    Instead, roll in a higher gasoline tax, return it as a tax credit, and by doing so,
    1) give people a reason to pay for better fuel economy, and
    2) give them some cash to do it with, without having to raise net taxes or fund hybrid incentives (except for research?).

  • Bilbo

    Sorry Ross Nicholson, but i agree with Samie. I don’t think your ideals are fully aligned for 2009 and beyond. If you’ve read Mitt Romney’s NYTimes article from several weeks ago, go compare a $30k Taurus and a $30k Camry. If the Camry looks, sounds and feels much nicer, that’s because it is. The American auto industry is automatically in the hole $2000 to $3000 PER CAR due to wages and benefits for employees and retirees. That’s just completely non-competitive, and asking Toyota to raise their pay to make it easier for their competitors doesn’t seem realistic.
    It’s going to take a loooong time for our recovery to come around. Don’t hold your breath. Of what’s controllable? Build a better car that’s more reliable, and people will buy it. It doesn’t even have to look that good. The Prius is hideous, but a cutting-edge vehicle that is extremely reliable. On the other hand, how can ANYONE defend the Pontiac Aztek? Does a Taurus make anyone driving it feel cool?? I’m afraid to say that the average American auto worker may have been overpaid for a long time by an industry that hasn’t been able to sustain these wages for just as long. The blame shouldn’t go to bankers getting bailouts. That’s got nothing to do with the price of tea in China. The blame should be on the domestic auto manufacturers who’ve been stuck on building hi-profit gas guzzlers, and ignored the future. What’s unfortunate is that the bailout is becoming the new American way. Americans need to grow up and stop expecting others to fix our problems.

  • Bryce

    I am not a big fan of the Taurus……but if there is anyone out there that thinks they look “cool” in a camry, they are probably over 60. Give me a Fusion, Malibu, or Accord over a Camry any day. (Altima too, don’t forget about them) All of those cars get better fuel economy, look better, and have better build quality. (according to consumer reports, jd power, jalopnik, and a whole host of others.

  • Shines

    Bryce I don’t know why you choose to change the subject to put down Toyota. Only the Malibu and Altima get better mileage (not counting the hybrids -of which only the Altima gets better).
    And Toyota reliability is 2nd to none.

    As far as the thread related to the article I agree with Samie and AP.
    If we really believe using foreign oil is a threat to our national security (which I believe it is) then we definitely need to tax it more. It will be very tough on our economy but is the right kind of sacrifice to make. You’d have to agree it is part of our war on terrorism.

  • Samie

    AP, I’m not sure I agree with you about just creating supply if you required luxury vehicles to be hybridized. Why? People will always buy luxury cars for socioeconomic reasons, even if hybrid technology was built in. Another key point one should realize is that if one buys a 60K vehicle they are not looking at efficiency as a main priority in fact they factor in absorption of higher fuel costs. Also luxury vehicles are some of the most inefficient cars out there. As for profits the top ends typically create higher profit margins for the auto manufactures. What you do is give maybe 5-7 yrs to mandate this, so all companies can adjust and reduce costs of their technologies. One could argue instead is simply require all V8 models to have hybrid technology.

    As for the gas tax not sure, as I said above people who buy top end cars don’t value gasoline prices as much as others so what ends up happening is you create higher constraints on people who really can’t afford more income being spent on fuel prices. Cost for fuel efficiency, 2-3K more for a individual buying a car from 12-22K is more important than someone who looks at a 60K vehicle.

  • AP

    Shines, I think you missed a part of what I said. By raising the gasoline tax, taking all that revenue, splitting it up evenly, and returning it to everyone as an income tax credit, you’d actually help the economy. If we phased in a $2 tax over 7 years, for example, the average tax filer would get about $1000 back. This would

    1) Suppress demand for crude oil, driving down its price, and we’d send fewer dollars outside the country to hostile regimes.
    2) That money would stay in our economy and strengthen it instead, helping our trade balance.

    Other than that, it would help domestic auto makers by ensuring consumers (not just politicians) demanded fuel-efficient vehicles from them and would value them, it would reduce urban sprawl, etc., etc., etc.

    I really think we should push the politicians to make this part of the long-term viability plan for our auto makers. If we’re going to mandate the more-efficient vehicles, we should create a reliable market for those vehicles as well.

  • AP

    Samie, After reading more of your post, I just wanted to add a couple of things.

    With regard to requiring that luxury cars be hybrids, consider our previous laws on requiring certain requirements for certain types of vehicles. The California EV mandate was a debacle (especially for GM, who actually followed it), but the bigger failure was CAFE (Corporate Average Fuel Economy). In the 1970′s, no one drove trucks unless they had to, so it was perfectly reasonable to hold them to a lesser standard (they must be bigger, heavier, and more powerful for their purpose). Everyone assumed fuel prices would continue to climb (deja vu), but in the mid-1980′s gas dropped, and people relapsed into old habits, wanting larger vehicles. Manufacturers responded to the consumer demand, and now we have 6000 pound “commuter trucks.”

    Your solution sounds good now, but I can see it quickly becoming a question of “what’s a luxury vehicle?” vs. “what’s not?” Is it by price? Weight (note that hybrids are heavier)? Interior volume? Number of seats? The V8 suggestion could also be “gotten around” by making larger V6′s.

    Whatever law is written like this will have unintended consequences. We had a luxury tax on vehicles for a while, which reduced sales of luxury vehicles and put people out of work.

    Also with regard to a gasoline tax being more difficult on lower-income people, this is a reasonable concern. But we can solve this by using the gas tax revenue to fund an income tax credit (not merely a deduction) to all people who file for income tax (NOT just for those who have to pay). This way everyone, including low-income people, would get a share of the revenue (about $1000/person when the tax gets to $2/gallon with today’s consumption).

    As far as rich people buying very fuel-inefficient vehicles, CAFE will take care of most of that. Also, the amount of fuel used by rich people is a drop in the bucket compared to the total. I think we need to make this results-oriented. It doesn’t bother me to see someone who’s richer use more fuel. Judging by Al Gore’s following, it doesn’t bother the Greens either.

    I think the simpler the solution is, the more chance it has to work. Shift the tax base (somewhat) to gasoline from income, and let the market (consumers and manufacturers) find the best solutions, not lawyers and politicians.

  • Get the Heck Out Of Detroit

    The only solution to solving the auto crisis is to move it out of the cesspool and hell hole that is Detroit. Detroit is worried about bankruptcy tarnishing its image? Has the media and the American people been to Detroit lately? 21% unemployment, ranshackled neighborhoods, worlds worst crime rate, worlds worst weather, worlds worst NFL football team, worlds worst living conditions.

    That’s certainly an image that makes me believe in buying American again. And, image is exactly the reason The Big 3 used as an excuse for NOT going into bankruptcy. Image always plays a role in any consumer purchase. The image of Detroit is of an abysmal, rusty, filthy and corrupt industrial city of yesteryear that has no relevance in todays world. US Automakers need a makeover and Detroit is no place for that.

    There are far more progressive cities that would improve the image and maybe even the panache of US automakers again…Chicago, Dallas, Atlanta, San Francisco and L.A. would be frontrunners for corporate headquarters and better draws for the type of intelllectual and innovative designers and engineers that are needed to move the US auto industry into the future.

    Chicago has the corporate infrastructure and influential politicians to get it done quicker. The other cities also offer excellent business infrastructure and, as well as more friendly and warmer climates to attract top intellectual capital to help streamline the auto industry. They also can provide affordable, non union workers to compete with the imports in production.

  • veek

    Hang in there.
    Time is favoring efficiency, even if the short term news is bad. Hybrids are relatively expensive (any expense now is a turnoff), gas is realtively cheap, and the bailout means the corporations can take short cuts, but things are better than they were.

  • Shines

    AP I see what you’re suggesting. Giving the tax back to the consumer as a credit. Ideally that would be great. Unfortunately I doubt it would work smoothly. Part of the issue is funding for alternative and renewable energy. Another part is improving infrastructure (both the electric grid to support EVs, and just roads and bridge improvements.) Human nature/govt nature would be to spend taxes – not give credits back to the tax payers…
    Still taxing oil is a better idea than CAFE.

  • Bryce

    lol, Chicago is one of the most corrupt towns in America. Can anyone say Mayor Daly and his generational family political machine??? rofl.

    O, and toyota’s quality is second to…..well, according to jd power, jalopnik, consumer reports, and a whole host of others, Honda, Chevy, and Ford in quality, fuel economy, and style. Sounds convincing enough to me.

  • sean t

    I hate to say this but Bryce is a Toyota hater.
    I just visited consumerreport.org and there were tests they performed on many models/brands and ranked cars: tier 1 and tier 2 recommendations. Tier 2 is more stringent than tier 1. Here is the results:

    Tier passed Toyota Lexus Honda Acura

    2nd 13 4 9 3
    1st 6 5 3 0
    None 4 1 3 2

    Models tested 23 10 15 5
    So the ratios of models that did not pass any tier of the aboe brands are:
    T: 4/23
    L: 1/10
    H: 3/15
    A: 2/5

    Bryce, watch your mouth the next time, mate.

    Enough said.

  • AP

    “Get the Heck out of Detroit”, I don’t know any other way to characterize your statements than biased and uninformed. To start off with, the only thing in Detroit is a headquarters (GM’s). All the research, development, etc. of all the companies in in suburbs (Dearborn, Warren, Troy, Auburn Hills, etc.).

    The idea that because a drop in business has hurt an area means we should pull out of it is not an American one. What has made this country great is perserverance and focusing on a goal.

    Your idea of America is straight from Hollywood. Don’t you think the fact that American auto companies and their engineers work in the “world’s worst weather” is a sign that they might be very dedicated to their jobs?

    When the Big 3 had lots of cash (25 years ago), many people were just in it for the money (GM was called Generous Motors). Now you only have the hard core engineers that were born to do it and don’t care that they could find a better paying job elsewhere with better weather.

  • AP

    Shines, I see your point, but look at what we’re doing. We are giving $700 billion to the banking industry (20 times the original auto loans) without raising taxes; we’re either borrowing or printing money. I believe that the programs you mentioned will be funded by further deficit spending.

    I doubt that Obama’s administration wants to take any net cash out of the economy in the near future. That’s why I’m suggesting the tax shift.

    Note also that consumer fuel-efficiency demand would encourage many details the government would miss, since they don’t know how to design cars.

  • crut100

    And how would that help anyone? Just increase the price of the Toyota, Hondas, etc so that even fewer Americans could afford them and drive down sales even more. Overburden those manufactures with exorbinant labor costs ($80K to drive a forklift is just STUPID) and delay innovation just like has happened with the Big 3. If auto workers in America are the best then how come the build quality, for the most part, is pathetic compared to the rest of the world. Frankly, I feel that a great many of them are nothing more than overpaid prima donnas. Getting paid to sit on their butts in a “job bank” is assinin, yet a great many of these workers think it is their right. A Job is privlige and need to be constantly earned. These unionized workers make significantly more money and put out an inferior product. They are very much to blame for these problems. All this said, IF GM builds the Volt and it reviews well I’ll be first in line to buy one. Last, how do you even propose to “force” them to increase wages? This is a semi-free market economy in a democracy. You can’t tell someone how much they have to pay their people above minimum wage. People choose to work their or not based on the pay and it seems to me the people working in these foreign auto manufacturing plants in the US are fairly content. Prudent management has kept them in a job.

  • Get the Heck Out Of Detroit

    AP Sez: “Don’t you think the fact that American auto companies and their engineers work in the “world’s worst weather” is a sign that they might be very dedicated to their jobs?”

    History has had all sorts of dedicated workers that have had to endure unsafe and lousy work conditions throughout the generations…Egyptian slaves that built the pyramids, children workers in Chinese government factories, migrant workers in California farms, Peruvian natives in the coca fields. I rank anyone that lives, works and breathes the stanky air in Detroit in that category of worker.

    Dearborn, Warren, Troy, Auburn Hills are no better places to live, work or raise a family. So what..they have malls, Starbucks and a few swanky places to eat. They still have to wake up every morning and come to the realization that they live in Michigan and as I speak the temperature outside is -4. That’s no life to live….and you can’t pay the real stars of industry to ever come there and work. Has anyone ever really listened to GM CEO Rick Wagoner talk? He makes George Bush sound like Einstein. And that’s about as good as it is ever going to get as far as the intellectual capital in the auto industry as long as it stays in Detroit. Detoit will always get the sloppy seconds while progressive cities like Dallas, Atlanta, San Francisco and L.A will always recruit the nations most brilliant. (I’d put Boston up there too, but it’s not a good fit for the auto industry) New York? Not a chance…not even in the top 20.. It has no relavance anymore and it will get worse.

  • Bryce

    well, I assume since the temperature where you live is -4 degrees, you are also one of those fools living and working in Michigan. You could always move. There is no snow here in California, just rain, and usually not much of that. Wait a minute though, you shouldn’t, there is a GM design facility here in southern california…..and I guess you wouldn’t like that……nevermind.

    As for me hating Toyota……I actually hate that people label that brand as the end all car company when, in fact, they make sub par vehicles relative to their competitors.

    jd power ranks malibu as best in initial quality

    http://www.jdpower.com/autos/articles/2008-Initial-Quality:-Midsize-and-Large-Cars

    car&driver ranks the camry behind the Malibu……and the hyundai Sonata, and the Honda Accord, and even the Nissan Altima in head to head testing.

    http://www.caranddriver.com/reviews/comparison_test/sedans/2008_honda_accord_vs_nissan_altima_chevy_malibu_hyundai_sonata_toyota_camry_ford_fusion_dodge_avenger_comparison_test/(page)/1

    Camry fuel economy (automatic transmission)
    21/30

    Accord fuel economy with auto
    22/31

    Malibu fuel economy with auto
    22/33

    you can check that on the federal mpg website

    Are you convinced yet? I don’t hate foreign brands as some people on this site do, in fact, I think the competition is good. What I loathe is an undeserved title for somebody that half asses the work. So while Honda, Chevy, and Hyundai jet ahead, Toyota is lagging behind leaving only the old folks that remember the 70s to buy their vehicles.

  • Jose

    Just because gas prices have come down, that doesn’t mean they going to stay down. Think about it! Hybrid cars are the gateway for us to be completely free from foreing oil. We may not be feeling the pinch righ now but we will again real soon. All of these car companies need to continue producing more fuel efficient cars, so that we can stop giving away our monies to oil tycoons.

  • Get the Heck Out Of Detroit

    Bryce,

    Do you think I would be dumb enough to live in that awful state? I live in SoCal. There’s no better place to live, work and play. You know, you really have to question the intelligence of the Michigan people that live in those conditions. And these people are running…er I mean ruining our nations auto business?

  • Snowman

    Get the Heck Out Of Detroit you must have had a bad childhood you must cringe at thoughts of hot chocolate after a day of playing in the snow or sledding. Sorry if your experiences are only filled with Starbucks after a day of skiing. I hope your company relocates you to Bismarck North Dakota.

  • Bryce

    rofl, or better yet, anchorage. I love my socal, but damn has it been cold lately. I want the heat back.

  • Get the Heck Out Of Detroit

    Snowman,
    I am an avid skier and have a cottage up at Lake Tahoe, so I do love that sip of hot chocolate after a hard days of skiing. For me, snow is a just a toy…I love it…just as long as I don;t have to live in it.

  • Rita

    The hybrid cars are a very good means of alternate transport. They are very well economic. I also noticed a hybrid car from Mitsuibishi, the iMiev that gives a huge breakthrough.

    http://www.kanbal.com/index.php?/Car/plug-it-ride-it-enjoy-it.html

    It also has some pictures and videos of the new hybrid

  • anon

    You can bag on “Get the Heck Out Of Detroit” all you want, but he is correct. My old neighbor in Wichita, KS left Chrysler for Cessna for more than a few reasons. One was they no longer wanted to live in Detroit. Wichita certainly wasn’t a ton warmer, but the cost of living, and standard of living was one factor they mentioned when he was looking for work. Lucky for him they got out about 2 years ago. They told us their kids had no desire to move back to Detroit after college graduation. Michigan has run into hard times due to the auto companies, and all of the suppliers having problems. This is no different than Pennsylvania towns when steel mills closed. The big 3 must adapt, and if that means they pick up and move the HQ to a state where income tax and sales taxes are lower and cost of living is as well, then so be it. Otherwise we’re flushing tax money down the toilet so they can do what they want when/how they want, and come back for more handouts in 5 years.
    Texas has drawn a huge number of companies over the last 10 years due to no state income tax, relatively mild weather, and pro-business (not always good) moves in government. Say what you will about how Detroit isn’t that bad, but compare how far 80k will go in Michigan as compared to Atlanta or Austin. And no, don’t point out how much house you can get in Detroit, the market there is dead and we all know it.

  • AP

    Does no one else see the irony of people on this website, who you’d think might be environmentally minded, promoting further development in California or other states that are already overtaxing their local environment? California (with help) sucks all the water out of the Colorado River, dams up other areas in the mountains to support LA, and puts its power plants in Arizona so they’ll be downwind. It makes a nice haze in the Grand Canyon. The farmland sucks the groundwater out faster than nature can replenish it, and the salt water oozing in from the ocean to replace it is going to make the farmland worthless over time. And Michiganians are stupid for not living there?

    Southern California is not a natural place to live. It’s not sustainable. It’s OK to enjoy it there, but you have no basis to criticize others for living where they do. Living in Michigan is much more environmentally conscious than living in California.

    Then, instead of being complimentary to someone who can handle Michigan weather, they rip them instead! It’s actually nice to have variety – I can’t imagine the same old weather every day, even if it’s 70 deg.

    The engineers (who are non-union, by the way) who left the Detroit area have been those who didn’t care whether they worked on cars or can openers. Those who have stuck with it know what they are doing. The money used to be too easy (25 years ago). They aren’t just after the money now. They’re the hard-core knowledgeable ones.

    If you don’t mind a challenge, the domestic auto industry is a fascinating place to work right now – as long as we can get a consistent energy policy to design to.

  • Bryce

    That is a good point AP, though I do love my socal. : ) I think Mr. Get out of Detroit has an in-law Michigan or something.

  • AP

    Bryce, I think you’re right.

  • Get the Heck Out Of Detroit

    No I don’t have any relatives in Detroit, but come to think of it, it would be an appropriate place for my mother-in-law.