[AMERICA 123]

Excellent although necessarily 'long' article that asks many good questions and has some excellent proposals for action.

Regardless of how you might feel about hybrids or GM et al - strongly suggest you read it.


http://www.glgroup.com/News/Is-Toyot...et--23242.html

April 3, 2008

Is Toyota's Prius Being Dumped On The US Market?


Analysis By: Jack Lifton
Chief Executive Officer , Jack Lifton, LLC



INTRO / Implications: / Background

It has always been a mystery to OEM American automotive industry financial analysts how Toyota could afford to build and sell the Prius, and any other hybrids, without seemingly taking into account the escalating costs of the nickel metal hydride battery, NiMH, packs due to the commodity metal supercycle that has taken place entirely during the product life of the Prius.

The raw materials for the NiMH battery pack used in the 1999 Prius, 60 lbs of nickel, 24 lbs of lanthanum, and 3 lbs of cobalt cost a total of less than $400.00 then. The same battery today has a raw material cost of $1600.00. The added costs of manufacturing the components and assembling them, along with a built-in computer management system at least doubles the cost of the final 'battery.'

Are the batteries recycled? If so, where? Perhaps the solution to these mysteries plus the answer to the question "How much were the development costs of the NiMH battery?" is simple; the answer,for Toyota, may be zero.

PROBLEM DEFINITION / Analysis:

- and it has been believed up until now that Toyota, much against the grain of Japanese risk-averse culture, went ahead with the development of the NiMH battery as a gamble. One that paid off when GM dropped its EV1, lead-acid, battery powered car when California backed off on requiring zero-emission cars as 2% of sales in the late 1990s. Toyota, it has been believed, stepped into the void to establish its green credentials without any competition.

Toyota has never been forthcoming on the question of whether or not the Prius was, and perhaps still is, a 'loss-leader,' i.e., that it was being sold for less than its cost of production in order to establish a market.

One reason that Toyota could not answer this question is simple enough: Under WTO rules such loss-leading sales might well be determined to constitute 'dumping,' or selling below the actual cost of producing the product in its home country, which is considered a predatory pricing scheme, which gives an unfair advantage to the dumper and can be punished by special import duties and fines to level the playing field.

- but government backed R&D in the US has always been of a general nature and certainly never intended to give a competitive advantage to just one of the companies involved, -

One cannot help but notice that today GM having failed, along with its Detroit Three colleagues, to get $500 million of US government funding for a battery 'Manhattan' project has elected to spend nearly 1 billion dollars, so far, of its own money to hedge its bets by building a 'pilot plant' to produce electric cars of all types in limited 'mass' production while investing more than 100 million dollars, so far, in a mix of new and old battery development shops, such as A123 and SAFT, for example, while selecting just one global size battery manufacturer, Johnson Controls, International, to do the manufacturing engineering development for whichever battery type(s) is(are) chosen finally for mass production.

The question now becomes: Is the playing field between Toyota and GM level? Or, has Toyota had the advantage of having the Japanese taxpayer pick up the bills for the NiMH battery it and everyone else, except GM, uses today, and for the sale of each of which a license fee is being paid to Toyota(?), leaving it free to go down the lithium battery road with more cash than it should be able to do?

I am beginning to wonder if, in fact, the entire lithium battery development agenda in Japan, which Toyota's rival, Honda, is conspicuously not following, is a sham designed to deflect attention from an unfair deal struck by Toyota with the Japanese government for NiMH development to allow it to build hybrids only in Japan using Japanese labor and components while selling the cars almost entirely in the US.

Note also that NiMH batteries are critically dependent on rare earth metals obtained today only in China, and that the Japanese government has a stockpile agency, which maintains a supply of rare earth metals, and many others, at no carrying cost to Japanese companies to ensure that Japanese industry has supplies to bridge any interruption.

- Toyota has always used this excuse for continuing to make NiMH battery powered cars only in Japan.

ACTIONABLE OPTIONS / HOW TO CORRECT

I propose to the US OEM automotive industry, GM, in particular, that it get directly involved in bringing American rare earth metal mines into production, so that NiMH batteries and small powerful electric motors using rare earth magnets can be built here in the US using domestic raw materials.

The job of the Defense Stockpile Agency would then be only to buy and hold as a buffer against interruption of supply the rare earths metals critical to OEM automotive and military production needs.

I further propose that such stockpiled metals be mandated by law to be first offered to domestic American companies for their needs, and only if and when such needs are satisfied could stockpiled metals then be sold for export. This is exactly what Japan, China, and Korea do now.

Such a program and policy as outlined above would, in my opinion, cause non-Chinese manufacturers of batteries and electrical devices dependent on rare earth metals to move to the US en masse, just as American companies in those businesses have moved to China.

I further think that a case should be brought within the jurisdiction of the WTO by the OEM American owned and operated automotive industry demanding evidence that the Japanese government did not subsidize the development and the manufacturing of NiMH batteries for any Japanese company, and demanding if it is shown that they did that a fine be levied against that company, Toyota(?), for every hybrid ever made by it in Japan and sold into the US market, and that further, no such cars be further allowed to be sold in the US, which are not made substantially in the US using domestic American raw materials if they are available.

Japanese companies would be thrilled to be able to buy domestic American produced raw materials such as rare earths, and undoubtedly make hybrids here in the US if they could buy raw materials domestically for dollars.

KEY QUESTION :

Is anyone listening at GM headquarters or in Washington, DC?