Ford/Toyota Partnership Shows Standards Drive Innovation
Posted August 26, 2011
I’ve said it before: Regulation drives innovation. Innovation drives jobs.
The latest example is this week’s announcement that Toyota and Ford have forged a new partnership to bring to market faster and at lower cost, new hybrid gas-electric systems for pickups and sport utility vehicles. It’s no coincidence that this announcement came barely three weeks after the President’s announcement to strengthen standards to deliver 54.5 mpg by 2025. Ford and Toyota’s partnership will accelerate innovation, deliver better technology to the market sooner, and add to the existing fuel-efficient supplier job base of 150,000 workers.
Technology Cooperation Key Strategy to Meet 54.5 mpg
Why would Ford and Toyota share their precious technology secrets? Here’s the primary reason: The establishment of 54.5 mpg as the average for fuel economy of cars and truck by 2025. In addition, a full hybrid pickup truck is heavily incentived through a generous 20 gram CO2 credit, worth roughly 1.5 mpg to a 25 mpg truck.
With that target in sight, it make sense for car companies that have taken similar technology approaches to join forces—both Ford and Toyota have had similar front-wheel-drive “powersplit” hybrids on the market for years.
In the Toyota-Ford tie-up, the companies agreed to share development costs to bring the technology to market quicker and cheaper. With the 54.5-mpg target in place, they need to accelerate the adoption of hybrid drivetrains across their lineups, including developing new and more powerful systems for pickup trucks that tow and haul heavy loads.
Hyundai Challenging Hybrid Leaders
The second reason that Toyota and Ford are teaming up is the fierce competition for hybrid market leadership. The dominance of their powersplit hybrid systems is being challenged by new entrants.With just a few months on the market, Hyundai’s Sonata Hybrid is already the second best selling hybrid in the country.
Hyundai/Kia, VW, Nissan and Honda have developed a new, simpler, lower cost hybrid system, called “parallel 2-clutch” (or “P2”). In order to maintain their technological and market edge, Toyota and Ford must redouble their efforts to improve their powersplit system.
More Hybrids Means More Jobs
There are many benefits to this partnership: lower fuel bills, less pollution and oil dependency, and more engineering and manufacturing jobs. According to our new joint report with UAW and National Wildlife Federation , “Supplying Ingenuity: U.S. Suppliers of Clean, Fuel-Efficient Vehicle Technologies”, there are already more than 300 companies located in 43 states and the District of Columbia that are responsible for employing more than 150,000 workers directly and for employing hundreds of thousands of others indirectly.
About 22,000 of these jobs are connected to hybrid components. These jobs will grow as the market for hybrids grow.
Technology Partnerships Not New
The closest example of a similar technology partnership is with is the “dual mode” hybrid system developed in a cooperative effort between General Motors, the former Daimler-Chrysler duo, and BMW in early days of hybrids.
The resulting two-mode hybrid system is currently found on vehicles such as the Cadillac Escalade Hybrid and BMW X5 Hybrid. While the two-mode hybrids have not been big sellers, the technology is in place for both companies to get a heads-start on rolling out even more fuel-efficient SUVs and trucks to meet rising standards. (They’ll need to compete with whatever Ford and Toyota are cooking up.)
Other examples include:
- Ford’s cooperation with PSA Peugeot Citroen on development of efficient diesel engines since 1998.
- Toyota’s $50 million investment in and partnership with Tesla Motors to produce an all-electric version of the RAV4 SUV.
- Fiat’s acquisition giving Chrysler a lifeline for new fuel efficiency technologies, multi-air and diesel engines.
- GM and Ford manufacturing partnership for 6-speed automatic transmissions.
New Industry Mantra: “Cooperate or Die”
Expect to see more such announcements in the future as the traditional competitive forces between companies gets overridden by the new imperative to bring fuel efficiency technologies to market fast. The new industry mantra may be “cooperate or die”.