George Will Disses the Prius, Obama and the Facts
On This Week with George Stephanopoulos Sunday, conservative columnist George Will commented on President Obama's emphasis on green cars, now that the White House is arguably a co-owner of Chrysler and is running GM, and said that the Prius is only successful because it doesn't make any profits:
[The Prius is] affordable because Toyota sells it at a loss, and it can afford to sell it at a loss because it is selling twice as many gas-guzzling pickup trucks of the sort our president detests. So as an auto executive, he's off to a rocky start.
But that's not true. By George, Toyota and independent analysts say the Prius is a money maker for Toyota, and it has been since 2001.
Round 2: George Will vs. the 2010 Toyota Prius (Alex Pasternack)
Hybrids Generate $3,100 in Profits
As we noted last week, Toyota and Honda, though both struggling in the recession, are making about ¥300,000 (US$3,100) on each hybrid they sell, a number similar to what they are making on gasoline-only cars, according to Japan's Nikkei. The Nikkei adds that "Toyota appears to have earned gross profits of around ¥100 billion yen (US$1 billion) on its sales of second-generation Prius hybrids last year." And in spite of the recession, pre-orders are rolling in for the third generation, solar-roof-optional, 50-MPG 2010 Prius hybrid.
Last year, ToMoCo Vice Chairman Kazuo Okamoto told Automotive News how the company had cut costs.
We reduced costs of hybrid systems for the current Prius by 50 percent from the first generation. For the next-generation Prius, we will be able to cut costs by another half, so I think we've been able to ensure profitability will be similar to regular vehicles, such as the Corolla.
For years, the research and development costs that Toyota poured into its flagship hybrid car had kept it from earning true profits, something that it sought to quietly play down. While the company still doesn't reveal exact figures, financial analysts have backed up the company's claims.
But as Mike pointed out recently, "since [R&D] can be spread over many vehicles, over a long period of time, and since it can help automakers future-proof (a lot of hybrid tech will probably be useful in plug-in hybrids and electric cars), it would probably cost more not to make those investments."
Honda's Insight
Meanwhile, Honda's "hybrid for everyone," the Insight, is making a profit too: 15%, factoring R&D costs. That's low, says BusinessWeek, and
puts the Insight on a par with a Fit compact in terms of profitability per vehicle. Of course, that's much less profit per car than it gets from selling an Accord or an Acura but, with Honda aiming for 200,000 Insight sales a year, it at least helps shore up finances in these difficult times...
Also of note is that the new Prius may be less profitable than its smaller rival. The Nikkei adds that the gross profit margin on the latest Prius, which goes on sale in Japan in May from as little as $21,000, is likely to be in single digits this year.
The 40 MPG Insight is already on sale in the U.S. for $19,800, and citing their place in the "mainstream," Honda has recently announced deeper investments in advanced hybrid cars.
Ultimately, the Japanese automakers profits from hybrid cars can't be completely verified. But that doesn't mean they aren't making profits -- and evidence suggests they are, and increasingly so.
Government Backing?
Alongside the continuing claims about Prius profits, there have also been persistent rumors that research for the Prius and other Japanese hybrids was funded by the Japanese government.
That claim was apparently confirmed by former Toyota VP Jim Press last year, who said that the government paid for 100% of the research into the Prius during the 1990s. Curiously (and now, ironically), Press made the statement shortly after becoming president of Chrysler, and was contradicting sworn testimony he had once given to Congress that Toyota had never benefited from government investments.
Toyota shot back: "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," company spokesman Paul Nolasco told The Detroit News.
But let's assume the Japanese government had in fact helped fund the Prius, giving it an apparent advantage over US automakers. Now that the US government has had to get into the auto business -- at least temporarily -- government investments in green cars doesn't sound so wild or unfair after all.
In fact, as Hybrid Cars notes, the U.S. government has invested in hybrids: under the Clinton Administration's Partnership for a New Generation of Vehicles, it spent more than a billion dollars to produce three 80-mpg hybrid prototypes, including the Chrysler ESX. (None of the cars ever entered production.) Today taxpayers still support hybrid R&D through the U.S. Advanced Battery Consortium -- and, of course, through all the government's bailouts for Detroit.
Now, more than ever, encouraging greener automobiles must be the U.S. government's job, says the White House. That was the point Obama made during a recent press conference, in a statement that sparked George Will's comment:
OBAMA: I don't want to run auto companies. I don't want to run banks. I've got two wars I've got to run already. But I know that if the Japanese can design an affordable, well-designed hybrid, then doggone it, the American people should be able to do the same. So my job is to ask the auto industry, why is it you guys can't do this?
Where's the Will-power?
This is not the first time George Will has been on difficult terms with accuracy. He once claimed for instance that because of the mining of zinc needed for its batteries, the Prius was worse for the environment than the Hummer. His were worthwhile doubts, and while it would have been a great contrarian point, his argument was based on a widely discredited study.
But Will's most prominent fight has been his refusal of manmade climate change, against the findings of scientists and the assertions of the editorial page of his newspaper, the Washington Post. But like his assertions on climate change, his offhanded comment about the Prius is more than inaccurate. Given the need for US automakers to get with the programon innovation, comments like his sound strangely defeatist too.
Because doggone it, if the Japanese can design an affordable, well-designed hybrid, the American people should be able to do the same.
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I've been doing a lot of research on this, and the $3100 profit on hybrids number is misleading. (It could be less misleading if anyone has the text from the original Nikkei article).
The quote that green car congress (The original source of all these stories) state that Toyota and Honda earn a GROSS profit of $3100 on each hybrid. Being a financial organization, I'm guess Nikkei uses the definition of gross profit of sales price minus manufacturing cost. This does NOT include R&D, marketing, logistics, ect. For an example of this, last year GM made a "Gross Profit" of 3.5 billion on the sale of it's vehicles. Unfortunately, their net income, was a loss of about 30 billion.
Unless the text of the article is more revealing, only Toyota knows if they're making a profit on the Prius after all costs are factored in.
Indeed, only Toyota knows for sure. However, their willingness to produce ever more and to continuously invest in the brand indicates that it is making money for them.
OK... I take that back. GM knew for a decade that they were losing money on each car, nevertheless they kept making ever more of them, too...
:-)
Absolutely, only Toyota knows for sure. And I suspect only those in the controllers office and executive suite of Toyota know for sure. Everyone else is just guessing. But Toyota's willingness to produce more indicates that it is indeed profitable for them. On this I completely agree with KTM.
Ah yes,only Toyota knows for sure and not telling for a reason
Considering they are expected to post a 6.9 billion dollar quarterly loss tomorrow, I don't think they're making money on anything right now.
But they do certainly seem to believe that it is their future.
George Will you please shut up!
Mr. Pasternack's two citations do not prove his point. One of them is an article from 2001 stating that the Prius had just crossed breakeven, but does not indicate what has happened since then. Is that just an assumption that it remained a profitable franchise in every year since? The other article actually refutes his point. Toyota loses money on every Prius sale, even the company has said as much. The good news for Toyota is that sales have dropped off so much with the drop in oil prices that they won't lose as much on them in '09 and they did in '08 and '07.
"Is that just an assumption that it remained a profitable franchise in every year since? "
Hardly. You can look at Toyota's efforts to ramp up Prius production with increasing demand. A company that is know to be highly efficient and profitable with their car sales is not going to sink ever more money into a loser design. The only car companies known to do that are American. You can look at each quarterly report by GM and calculate how much they lost on every vehicle built.
"Toyota loses money on every Prius sale, even the company has said as much. "
Please give a citation of when Toyota was supposed to have said that.
All in all.. you have nothing but what somebody made up for you to reiterate.
Toyota has yet to prove anything
Will what?
I worked at a Toyota dealership,all I know is what I was told,Toyota was losing money for years on the Prius,it had a lot of problems when it first came out,I will say Toyota stuck with it despite the loss,hoping it would catch on and it may be,but Toyota still losses money,but as things pick up they will sell enough to make money,so the gamble may pay off.
Now prove it.
:-)
You prove they don't,the Japanese still fully haven't honored their trade agreement from the 80's,so messenger all the web sites that talk about the problems of the Prius by customers themselves isn't enough for you.All I know the dealership was fighting with Toyota on who was taking the hit in cash.You know messenger the Japanese aren't as open about business as we are here,they deny,just like you.
Messenger I don't like George Will but I think he's right here,But I guess you don't believe Jim Press either,I mean what doe's Press know,he worked for Toyota for 37 years,was the first non-Japanese President of Toyota of North America,under his leadership sales grew from a 100,000 vehicles a year to second place in America,so you know better.
It has been reported that the Prius is less green over all than a Land Rover Discovery. All the mining, processing and future disposal of those nasty batteries.... not to mention the transport around the globe of all those parts...
It hasn't been "reported". It has been claimed, though, and these claims have been refuted as soon as they were made. NEXT.
How many times do people have to be told that the "Giant SUV is greener than a Prius" story is nothing but a fairy tale.
A couple of weeks ago Will's column chided wearers of blue jeans for not putting away (as it sayeth in The Bible) childish things.
Any day now I'm expecting his annual column extolling the virtues of grown men getting paid to hit a ball with a stick and then chase each other around with the ball.
These cars may be fuel-efficient, but given the many and not environmentally friendly manufacturing
processes required for the end product, to say they are "green" skews the truth.
The DOE has backed numerous R&D ventures into hybrid vehicles. On top of the PNGV program, aka the Supercar, it backed the FutureTruck program for years.
For those not in the know, the FutureTruck program was a college competition where Ford donated an SUV to competing colleges to be converted into high-efficiency, low-emission vehicles. Colleges produced a variety of designs, from experimental battery-powered electrics to fuel cells to parallel hybrids (what the Georgia Tech team I was involved with produced).
Of course, none of those designs were ever incorporated.
The development of the UNIVAC shows that for a computer to exist, it'd be big, bulky and take up an entire building. They'd never sell and would never be practical for home use. The US gov't shouldn't be involved in its development, as it's a waste of time and money.
Nice foresight there.
I recently bought a used Prius, found that they were still in demand. I get low 40's for MPG.
I spend half the time and money at gas stations that I used to. I don't miss it. A country that all got similar mileage would also save money by getting into only half the wars for oil.
All you have to do is use the aloof and over educated accent of George Will and anything you say will be regarded as truth. It's magic? No, it's mainstream media.
People arguing over what model car to sell are missing the whole reason why the Japanese companies do better than the American ones
Its about healthcare. Japanese car companies do not have to pay out any money for healthcare.
American companies have to spend billions. That's the difference
Health care is always being paid by employees and employers. Even in Japan. The difference is simply in the efficiency of the system (Japan has rigorous cost controls) and the way the government collects the payments. So you are basically blaming the Japanese to provide better health care cheaper to their people?
Makes total sense... in cuckoo land.
The government collects the payments?
Will suffers from the same self serving dementia Cheney, Rice and other republicans suffer - the "if I said it, it must be true" disease. If there is no accountability, there is no stopping them.
George Will, despite his professorial demeanor, has never been one to stick too closely to the facts to make his right-wing talking points.
Here in central Texas, many of us drive a Prius! Austin is a very green city, with the good sense to ban plastic grocery bags, etc. When we visited San Francisco, we saw tons of them there, also. Listen naysayers, this is the wave of the future, and they're really great vehicles.
We have a 2007 Prius and are trading it in for a new 2010. WE LOVE IT! It's a dream to drive, we get 50 miles a gallon on long trips, and have to stop for a potty break, not for gas! We got back-up camera, navigation system, smart key, and many more features, on the larger version, for $25,000. The new 2010 has added a solar fan to keep the car from getting so hot sitting out in the Texas sun.
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