From almost nowhere the Prius, Toyota’s hybrid-engine car has become an iconic product owned by Hollywood stars, Silicon Valley barons and increasingly the mass market beyond. This is bad news for...

From almost nowhere the Prius, Toyota’s hybrid-engine car has become an iconic product owned by Hollywood stars, Silicon Valley barons and increasingly the mass market beyond. This is bad news for some auto manufacturers, especially the US companies Ford and General Motors. US auto companies refused to accept that American consumers would switch away from ‘gas 3 guzzling’ Sports Utility Vehicles (SUV) built on light truck chassis frames. However, as oil prices continued to rise, consumers changed. For a decade or so the SUV boom allowed Ford and GM to enjoy high margins and resist any inroads from Asian manufacturers, led by Toyota and Nissan. The formula no longer works. Both Ford and GM are suffering, particularly since the economic crisis of 2008. GM and Ford’s scepticism over the appeal of fuel-saving engines has made them technology laggards. Even worse, they are finding responding difficult because both are beleaguered by heavy pension and medical costs of an ageing workforce. A heavy capital structure makes it hard for them to change with the shift in consumer preference in their domestic market. Asian companies have taken a strong lead in hybrids. Nissan and Ford have licensed the technology from Toyota, while Honda has developed its own system. Japanese manufacturers have always been adept at improving manufacturing efficiency and using product range as the platform to compete. They also continue to stress the long term rather than change direction to maximise short-term return. Ford and GM have constantly struggled to keep pace with Japanese technology, efficiency and quality.