Can You Have Green Cars Without The Red Ink?

The Big Three scramble to match Toyota's clean, affordable Prius

Detroit executives bristle when asked about the environmentally friendly cars coming out of Japan. Playing off the Kyoto global-warming conference, Toyota Motor Corp. downshifted the race to develop a "green car" with its Dec. 10 launch of the Prius, the world's first production hybrid gasoline-and-electric car. "There's some showboating going on," grumbled Ford Motor Chairman Alexander J. Trotman.

In January, the Big Three will have a turn to show off at the North American Auto Show in Detroit. All will roll out their most advanced research vehicles to demonstrate commitment to the environment. Ford got a jump on cross-town rivals by announcing on Dec. 15 that it would invest $420 million in a joint venture to develop fuel-cell-powered electric cars for the 21st century.

WEAK DEMAND. The Big Three may bag headlines, but there won't be much headway in producing the most advanced green cars. That's because, Motown insists, the public doesn't want them. With gasoline cheaper than bottled water, American consumers seem unable--or unwilling--to curtail their addiction to gas-guzzlers. Chrysler Corp. claims fuel economy ranks 19th among buyers' criteria in picking cars--right after "quality of the air conditioning."

So far, Detroit's brightest hope has been General Motors Corp.'s EV1 electric car. GM spent $350 million and six years to develop the little two-seater. So far, the car, available only for lease at $399 to $549 a month, has not attracted many customers. Largely due to the EV1's limited range, about 70 miles between charges, only 288 vehicles are now in use. By next fall, however, the company says it will have new nickel-metal hydride batteries to double that range. At the auto show, GM will unveil a hybrid car that runs on a small gasoline engine and electric motor. But the auto maker declines to say when, or if, the car will go into production.

Chrysler will show off an updated version of its ESX hybrid, powered by a diesel engine and electric motor. Auto industry sources say Chrysler has managed to cut the cost of the ESX by more than half, to less than $40,000. But that's still a long way from the $20,000 sticker of an equivalent gas-burner. Sources say Chrysler hopes the ESX will be ready for production by 2005.

Ford says it plans to launch its "family car of the future," code-named P2000, in the middle of the next decade. For now, Ford is using the P2000 prototype as a test bed for technology to jack up gas mileage and curb tailpipe emissions. Fuel cells--space-age devices that generate electric power from hydrogen and oxygen--hold the most promise. But since they are bulky and 10 times as expensive as a conventional engine, Ford's best hope is to outfit a few vans or buses with fuel cells by 2005. "We're a long way away from a high-volume vehicle that's affordable," says Trotman.

While critics say the Americans are stuck in low gear, U.S. car companies argue that their technology is as good as anyone else's. Annually, the Big Three are investing $1.7 billion in green car research, or about 10% of their research and development budgets. "Nobody has any lock on any technology," says GM Chairman John F. Smith Jr. The only difference, says Detroit, is that the Japanese are willing to accept losses on their green cars. Toyota may be losing as much as $16,000--nearly the sticker price--on each Prius it sells. "I don't know how long our shareholders would stand for that," says Peter M. Rosenfeld, Chrysler's director of new-generation vehicles.

Nevertheless, even Wall Street is impressed by Toyota's bold bid for green supremacy. "Eventually, the Big Three will be forced to field a car like this," says Morgan Stanley Group auto analyst Stephen Girsky. Or it can cede another market to the Japanese.

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