Wednesday, October 05, 2005

The Environmental Benefits of Competition

The New York Times Editorial Page usually focuses on saying something critical about President Bush. Today the Times was kind enough to focus on the environmental benefits of competition, corporate experimentation and avoiding "group think".

October 5, 2005 Running on Empty (New York Times Editorial)

"For years critics have been saying that a reliance on gas-guzzling but profitable sport-utility vehicles could not keep American car manufacturers afloat forever. On Monday, sales figures for the month of September came out, suggesting that the day of reckoning may be at hand. Large S.U.V. sales were down 43 percent last month from a year earlier. Automakers, of course, pointed a finger at Hurricane Katrina's effect on gas prices. But the explanation is really larger - a total failure of long-term planning.

Toyota's strategists and engineers had no idea what the 2005 weather would bring when they started working on a "21st century vehicle" in 1994. But they certainly realized that a more fuel-efficient car might be one way to succeed in a competitive market. They dedicated the resources and rolled out their first hybrid in 1997. The company spent a reported $800 million developing the Prius, ending up with roughly 650 patents on the technology. It took a little while to catch on, but Toyota nurtured and improved its product until the moment came when the new idea would finally take off. The moment has come. Prius sales were up 90 percent in September.

It's important not to fall back on stereotypes of "good" Toyota with its Prius, and "bad" General Motors with its Hummer. Toyota is a business and not an environmental charity. It sells Land Cruisers and Sequoia S.U.V.'s, both of which suffered right along with American behemoths last month, when consumers turned their backs on oversize vehicles. But Toyota had diversified with a large bet that a new product could be profitable.

G.M. says it will introduce hybrids next year. Ford expects to produce just over 20,000 hybrids this year, and plans to build 250,000 annually by the end of the decade. Meanwhile, Toyota is already doing it."

OIL DRUM and other "peak oilers" assert that a day of recokoning is approaching because we haven't taken self protective actions to economize on fuel consumption. For profits such as these companies are making these investments and if the Times is right Toyota is making money from their daring investment.