Toyota Ready for All Fuel Options, Addressing Quality Problems

January 15, 2008
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It’s an uncertain world, acknowledged Toyota President Katsuaki Watanabe, and any company hoping to be a success will have to address all of its options. With the increasing emphasis on green, fuel-efficient automobiles, that means preparing a wide array of alternatives, from gasoline-electric hybrids to hydrogen-powered fuel cell vehicles.

The CEO of what many expect to end 2008 as the world’s largest automaker, Watanabe presented his vision of Toyota’s – and the auto industry’s – future – during an early morning conversation covering a wide range of topics. Among the many issues Watanabe addressed: reports of mounting quality problems that has tarnished the reputation of the once seemingly invincible automaker.

Only a few months ago, the influential Consumer Reports magazine downgraded three key Toyota products, including both the V-6 Camry and 4x4 Tundra pickup, citing serious quality issues. Even the vaunted Lexus suffered a serious and unlikely challenge from none other than Buick, which matched its reliability numbers.

“Quality is key to our very existence,” declared Watanabe, responding to a question from at the 2008 Detroit auto show. And it’s something the CEO isn’t inclined to let fix itself. He has launched a number of initiatives to resolve nagging problems and suggested that, if necessary, Toyota’s rapid growth could be scaled back if it threatens to impact quality control.

Some of the problems have come from outside, suggested Watanabe, pointing a finger at suppliers who’ve delivered defective parts to Toyota plants. But in the long run, he added, it’s still Toyota’s problem to fix.

A fix is what’s needed for the environment, most industry leaders have come to grudgingly agree. Even those who still question the concept of global warming – and there are a few – acknowledge that consumers won’t accept a laissez faire attitude. If you aren’t part of the solution, it seems, you’re part of the problem.

If anything, Toyota has moved the needle with its heavy promotion of the Prius hybrid – never mind the reality of its sliding corporate average fuel economy, the result of a steady push into the pickup and SUV market. Here, perceptions are defining realities.

Watanabe, an early Toyota hybrid proponent, has been pushing to add a hybrid version of every one of the automaker’s products, and that plan hasn’t changed, though it may take until 2020 to accomplish, the executive explained. Hybrid sales are definitely on the rise, however, and will grow from less than 500,000 vehicles in 2007 to more than 600,000 this year, forecast Watanabe. By sometime in the next decade, he expects that to jump, again, to 1 million.

The automaker now owns a 60-percent stake in its battery manufacturing partnership with the electronics giant, Panasonic. Together, they’re racing to come up with an effective formulation for new, lithium ion batteries that can endure in the demanding automotive environment.

While considered the leader in hybrid technology, Toyota is facing an increasing assault, particularly from its U.S. arch-rival, General Motors. Last year, GM captured the Detroit show with its Chevrolet Volt plug-in hybrid-electric vehicle. The concept introduces a larger battery pack capable of being plugged into the electric grid, using the added power to handle up to 40 miles solely on battery power. GM promises to put Volt into production by 2009.

After initially poo-poohing the concept, citing problem with lithium technology, Toyota is now racing its own plug-in to market, hopefully by 2010, said Watanabe, using the Prius as a base.

Looking forward, said Watanabe, plug-ins, conventional hybrids, diesels and other forms of power will add need to become part of a manufacturer’s powertrain line-up. “As of today,” he asserted, “there is no single solution that solve all the (energy) problems” the world faces.”

Price is another challenge for manufacturers like Toyota. The Indian maker, Tata, announced, earlier this month, plans to produce a $2500 car for first-time buyers looking to trade up from carts and mopeds. Matching such an offering is “very difficult for us to come up with,” admitted Watanabe, though he insisted Toyota will keep trying. “We should never allow ourselves to lose our advantage in terms of quality and cost.”

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