GM, Ford Junk Bonds

I received this release today and it details some of the reasons Detroit’s automakers are in trouble. It is difficult to disagree with any of this. Friends often tell me that domestic cars are cheaper and have better incentives but who wants a domestic car? Obviously this isn’t too positive for Detroit and they better wake up quickly if they want to be around to supply cars for the next generation.

40MPG.ORG: GM, FORD JUNK BONDS SHOULD BE CALLED “YAEGASHI BONDS” TO RECOGNIZE LAGGING U.S. AUTO LEADERSHIP

Why New Debt From Ford, GM Should Be Named for a Japanese Engineer;
Poll:  63% of Americans Already Worry About U.S/Japanese “Hybrid Tech Gap.”

WASHINGTON, D.C.///May 9, 2005///Now that the Standard & Poor’s rating agency has downgraded the General Motors Corporation and Ford Motor Co. to junk bond status, Wall Street should take the next logical step and refer to any such new debt issued by the struggling U.S. automakers as “Yaegashi bonds,” according to 40mpg.org, a Web-based campaign organized by the Results for America arm of the nonprofit Civil Society Institute (CSI) to promote higher fuel-efficiency standards for U.S. vehicles.

Why “Yaegashi bonds”?  The little-known Takehisa Yaegashi is the Toyota engineer who is referred to in Japan as “the father of the hybrid.”   Part of Yaegashi’s training took place in the United States where he realized that passage by U.S. lawmakers of limits on automotive tailpipe emissions would require cleaner, more fuel-efficient autos.  The story of Yaegashi’s role in hybrids and the broader problem of the short-sighted thinking of U.S. automakers was spelled out more than a year ago in a prescient April 2004 MIT Technology Review article (“Hybrid’s Rising Sun”) by author Peter Fairley. 

Civil Society Institute  President Pam Solo said:  “The reason that Japan has at least a six-year lead today on red-hot hybrid auto technology is because people like Yaegashi saw the handwriting on the wall more than 30 years ago and set out to do something about it.   Japanese automakers built their pickups and SUVs just like U.S. automakers, but they also hedged their bets by focusing on fuel efficiency in a way that the U.S. companies did not.   Hybrids are not necessarily yet a major factor in what ails Ford and GM today, but the Japanese leadership in hybrids reflects everything that is wrong at U.S. automakers.”

Solo added:  Detroit can try to blame things on short-term gasoline prices or a downturn in the U.S. economy, but this is actually a much more deeply rooted problem that goes back more than three decades.  It’s not that the Japanese had an unfair advantage here or just that they were smart when U.S. companies unwisely rested on their laurels.  Instead, Japanese automakers simply acted the way that U.S automakers used to act when they were intent on maintaining the edge in sales, jobs and technology.  U.S. leadership in the global auto industry used to be Job #1, but today U.S. car companies are in real danger of getting the pink slip from consumers.”

According to a 40mpg.org national opinion survey released on March 17, 2005, more than three out of five Americans (63 percent) think the "hybrid technology gap" -  in which U.S. automakers will fall further behind Japanese and other foreign automakers that have more fully embraced the new fuel-efficient technology – is a serious or somewhat of a problem. The extent of this concern among Americans is essentially bipartisan, including conservatives (60 percent), moderates (70 percent) and liberals (69 percent).  Similarly, the concern about the hybrid technology gap is shared by 58 percent of NASCAR fans and 65 percent of car/truck/new technology enthusiasts.

The April 2004 MIT Technology Review article telling the story of Yaegashi reads in part as follows:  “The Hirose plant is off-limits to journalists, but the story of Toyota's program is one that its architect-Takehisa Yaegashi, the unassuming engineer revered within Toyota as ‘the father of the hybrid’-is eager to tell. Drinking black coffee in a nondescript meeting room in Toyota's offices in Tokyo, Yaegashi traces the origins of Toyota's hybrid strategy back to the early 1970s, when the U.S. Congress set the first national limits on tailpipe emissions.

In 1971, Yaegashi was a 28-year-old mechanical engineer, two years out of Hokkaido University, when Toyota assigned him to its new clean-engine project. Over the next 20 years, he designed everything from exhaust-scrubbing catalytic converters to emission-reducing engine control systems. All this helped make Toyota's fleet of cars one of the cleanest sold in the United States … But Toyota didn't stop at innovative catalytic converters. By the early 1990s-even as Toyota followed the lead of U.S. automakers by making popular but fuel-guzzling SUVs-Toyota's leaders prepared to redouble their efforts to clean up the automobile and make it more fuel-efficient. ‘We saw two things happening at the same time: demand for cleaner air and demand for greater fuel savings,’ recalls Yaegashi.”

The entire text of the Review article is available online at http://www.technologyreview.com/articles/04/04/fairley0404.asp?p=1.

ABOUT WWW.40MPG.ORG

The 40mpg.org campaign and Results For America/Civil Society Institute have no direct or indirect ties to any automakers in the United States or elsewhere around the world. 

Launched on March 17, 2004, the new http://www.40mpg.org Web site features a calculator that allows visitors to plug in estimates for their current vehicle's fuel efficiency level, a typical price paid for gasoline in recent weeks, and total number of miles driven per year. For example, a driver who gets 17 miles to the gallon, pays $2 a gallon for gasoline and drives 25,000 miles per year, could achieve the following each year by switching to a 40 mpg vehicle: save $1,691.18 at the gas pump; require 845 fewer gallons of gasoline from Middle East oil; and cut personal air pollution by 16,912 pounds of carbon dioxide (CO2) emissions.

The 40mpg.org Web site also permits visitors to: join a community of other people who own their vehicle make/model; compare and contrast one vehicle's fuel-efficiency ratings with those of others; monitor how individual members of Congress weighed in on the most recent fuel-efficiency standard votes; contact automakers to speak out in favor of more fuel-efficient vehicles; and send a letter to the editor of a local newspaper urging the adoption of a 40 mpg fuel-efficiency standard. Visitors who sign up at the 40mpg.org Web site will be contacted in the future to urge lawmakers and automakers to take action.

Results For America is a project of the Civil Society Institute, which is based in Newton, Massachusetts. The mission of CSI is to serve as a catalyst for change by creating problem-solving interactions among people, and between communities, government and business, that can help to improve society.  RFA seeks to shape and tap the tremendous amount of community-level knowledge, experience and innovative action that could solve America's problems in four key areas, including: energy policy. In this context, Results For America states: "Our national energy policy poses a growing threat to our health, to our economy and even to our national security ... Our oil imports make us more vulnerable to terrorists and give us less room to maneuver in our foreign policy. Our failure to develop the next generation of energy technology costs our nation well-paying jobs. The Results for America environmental initiative is designed to focus attention on the dangers of current US energy and environmental policies and to put real solutions front and center."

CONTACT: Ailis Aaron, (703) 276-3265 or aaaron@hastingsgroup.com.

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4 Comments

The issue is far more complex than a press release from a lobby group praising a Toyota engineer as the "father of the hybrd"... Implying that domestic automakers and their extended families deserve to suffer for stupidity and irresponsibility is an easy soundbite level commentary.

Beleagured GM made a far more green statement than Toyota ever did in the form of the EV1. I wonder how many of your referred lobbyist employees own SUV's?

Stick to VoiP Rich...

Dear Car-Nut,

I am also a car nut and have been for a few decades. I appreciate the rapid response to the blog entry.

The EV1 was a technological wonder as it was 100% electric – not a hybrid. I remember it coming and now going (http://www.gm.com/company/gmability/adv_tech/300_hybrids/hyb_ev1.html). The point you are making is a valid one – Detroit was ahead of Japan.

Still, as the release points out, hybrid technology is now in vogue… Not electric. If battery capacity had improved significantly, perhaps we would all be driving GM electrics (Maybe an EV2, 3 or 4) but that isn’t what happened and when I think of hybrid I think of Honda, Toyota and Lexus first and then Ford.

I feel comfortable saying that Innovation has left Detroit. The last really novel idea they had was the shape of the Ford Taurus which revolutionized how cars look. As a whole, Ford and GM are not making the investments they need to stay ahead of other car manufacturers and their unions and huge pension demands are a massive burden in a world where every manufacturer will have to compete with China.

In closing, I don’t want anyone to suffer and I didn’t mean to imply that anyone deserves to suffer. In rereading my comments, they are just my observations on reality. I am certainly cheering for the home team and want Detroit to pull out of this mess that they are in. I am also a realist and know this won’t be easy.

I suggest that you read this week's Autoextremist. Matt is far from a Detroit apologist and makes some good points.

http://www.autoextremist.com/page2.shtml#Rant

This is an excellent site and I appreciate you sharing it with my readers and myself. I agree that Toyota has an excellent PR machine and there is a dark side -- so to speak.

Specifically this statement is worth evaluating:

----
Their "we're the most environmentally conscious car company in the world" mantra - which they spout at the drop of a hat while they continue to churn out gas-guzzling trucks and luxury SUVs at a prodigious rate is transparent and blatantly untrue.
----

It would be stupid for Toyota to give up its SUVs so the next logical step is to work on developing hybrids that people want, including hybrid SUVs. All successful car makers have SUVs it seems – even Porsche. BMW has two that are almost identical in size (the 3 and 5 series).

Going green means adding hybrids and putting hybrid technology into SUVs that consumers want. Sure, others are doing the same thing. Toyota is just doing a better job marketing. In the end, the best marketer always wins.

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This page contains a single entry by Rich Tehrani published on May 9, 2005 4:09 PM.

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