April 21, 2008

Prius Not Profitable, Or Is It?

Profit: sell something for more then it costs to make it.

The answer is that Toyota isn't making any money -- despite the company's insistence otherwise -- and that the company is so rich it doesn't care. Toyota's profit plans are mapped out for a decade or more in advance, and when Toyota executives insist the Prius is profitable, they mean it's on track to eventually make a lot of money.

But with an estimated 25 billion dollars it took to develop the hybrid system how can Toyota be making a profit on the Prius already?

I just couldn't make the math work to cover the cost of developing the car, plus the proprietary equipment that goes into it, such as the pricey battery pack and the electric drive motor.

But Toyota insists that the technology they used in the Prius will also be used in other hybrids, so the R&D costs will be spread out over the other vehicles, thus they say the Prius is making a profit.

But are they really?

In an interview with Business Week, Chrysler President and Vice Chairman Jim Press said, "The Japanese government paid for 100 percent of the development of the battery and hybrid system that went into the Toyota Prius."

Press, during the development of the Prius, was the top American executive at Toyota, and he was the first non-Japanese board member. He worked for Toyota for 37 years before leaving last September to help run Chrysler. So he should know, right?

Of course Toyota is denying this. There has been talk for quite a long time in the auto industry that Japan subsidizes their automotive companies. Now we here the same thing from a previous Toyota executive.

So you have to wonder: If the government financed Toyota's hybrid development, might they not have done the same for Honda? And what might Ford, GM and Chrysler have done with a $25 billion gift from our government to develop hybrids?

If our government financed out automotive industry you have to wonder where we would be in technology advancements.

And everyone wonders why the Big 3 isn't as advanced as the Japanese. The Big 3 are financing all their technology on their own while the Japanese are getting all their technology paid for by their government.

Posted by Quality Weenie at April 21, 2008 08:29 AM | TrackBack