TOYOTA April 12, 1991 Toyota Motor Sales, U.S.A., Inc. (202) 822-0928 Fax The Honorable Malcolm Wallop United States Senate 237 Russell Senate Office Building Dear Senator Wallop: Thank you for giving Toyota the opportunity to express its views on proposals to amend the existing CAFE programs. This letter responds to the supplemental questions you have asked. I will address them in order. 1. Economic Feasibility. As S.341 is currently drafted, the criteria used to establish the maximum feasible average fuel economy do not take into account payback to the consumer for the added cost of meeting the required standards. Under the uniform percentage increase approach contained in S.341, this issue is highlighted for a company such as Toyota which has already applied high levels of advanced technology in all of its passenger vehicles. In order to achieve the same percentage increase as another manufacturer which has not applied the same level of technology as Toyota, we would be forced to downsize existing models and employ technology that is currently unproven and very costly. Given this situation, it is unlikely that the customer will save a sufficient amount of fuel during the period of ownership to equal the additional cost to meet the required percentage increase. For this reason, so long as S.341 incorporates the uniform percentage increase approach (as is done in Senator Bryan's bill), Toyota does not believe economic feasibility or cost effectiveness to the consumer can be adequately addressed. Your question also highlights the problem Toyota would face under the uniform percentage increase approach used in both S.341 and S.279. Due to Toyota's existing use of almost all of the technologies identified by Mr. Duleep in his testimony before the Committee on March 20, we will be faced with the prospect of using even more advanced technology in all of our vehicles without the ability to refine this technology through introduction of one or two lines. To the extent new technology is rushed prematurely into production, cost will increase due to an inability to fully utilize existing equipment. In addition, Ser Malcolm Wallop 121991 without adequate lead time for production preparation, overall quality and performance of the new technology could suffer. This makes the stakes for the forced introduction of commercially unproven technology very high. In other words, the uniform percentage increase approach incorporated into both S.341 and S.279 provides precious little time for companies that already have high penetration of advanced technology to develop and refine even further advances for the future. 2. Cost/Frequency of Repair of New Technologies. Toyota already employs multi-point electronic fuel injection (EFI) in all passenger cars and bight-duty trucks. We have had quite good success with this technology, both in terms of its effectiveness to better control combustion (emission control and fuel economy benefits) and reliability. But it has not been without significant increased costs over conventional carburetor technology. Likewise, Toyota has pioneered the use of multi-valve engines. Toyota began employing this technology in 1985, and today all Toyota passenger cars and vans have multi-valve engines as standard equipment. Other manufacturers have charged as much as $700 for these engines as optional equipment on a limited number of vehicle lines. After using this technology on a large number of vehicles for several years, we see no inherent reliability problems. Intake valve control technology is still under development at this time. We are not certain that sufficient benefits and reliability can be achieved, so we have no firm plans to introduce this technology at this time. 3. Per Capita Fuel Conservation. We do not know the effect CAFE standards have had on per capita fuel consumption and vehicle miles travelled (VMT), if any. Toyota believes the price of fuel has had a much greater impact on fuel consumption and VMT than CAFE standards. Attachment I demonstrates the relationship between the price of fuel and VMT. It is clear that as the price of fuel increases, VMT decreases, and vice versa. 4. Experimental Vehicles. Before addressing the issue of high-mileage experimental vehicles directly, it is important to make very clear the distinction between prototype vehicles and experimental or concept vehicles. A prototype vehicle is one that is close to production; whereas a concept or experimental Senator Malcolm Wallop vehicle is typically a hand-built vehicle which incorporates one or more major design or engineering features that will be tested for possible future use in vehicles. However, some ideas from earlier experimental or concept vehicles produced by Toyota and other manufacturers have never been put into production due to technological or production concerns and/or shifting market demands. It should be noted that often the features included in these experimental vehicles take many years before they can be installed in production vehicles. An example of a prototype vehicle is the Lexus vehicle which was displayed at the Detroit Motor Show shortly before it was introduced by the Lexus Division of Toyota Motor Sales, USA, Inc. in the fall of 1989. An example of an experimental or concept vehicle is the AXV vehicle which was displayed at the 1987 Tokyo Motor Show. This distinction should be kept clearly in mind. Toyota's AXV has been designed to include technologies that maximize fuel economy: a direct injection diesel engine; CVT transmission; use of new light-weight materials, and streamlined styling which results in a coefficient of drag of 0.26. As pointed out above, this is an experimental/concept vehicle, as opposed to a prototype vehicle. In other words, far more research and evaluation must be undertaken before one or all of the advanced concepts incorporated into this vehicle can be utilized in production vehicles. This is the very reason for designing this type of vehicle. The difficulties in incorporating the innovations of AXV into production vehicles are shown in Attachment II. 5. Dr. Whitman's Prior Statement. We are uncertain about what aspects of the existing program Dr. Whitman is referring to. For this reason, we are reluctant to respond without knowing the details of her concerns. 6. Safety Concerns with S.279. Toyota is pleased that your bill includes safety as a criteria to be considered in establishing the maximum feasible average fuel economy level. Our concerns with the uniform percentage increase approach contained in both S.279 and S.341 are based on the anticonsumer, anti-competitive effects of this approach which will result in a lack of fuel savings. Toyota's written statement submitted to the Committee for the March 20 hearing generally outlines Toyota's position regarding the safety criteria contained in S.341. 7. Approach in S.341. To the extent that S.341 requires DOT to consider safety and emission standards, size, and performance in establishing future CAFE requirements, Toyota applauds the authors of this bill. However, Senator Malcolm Wallop as I emphasized in my oral statement at the March 20 hearing, S.341 contains a fundamental flaw identical to that in S.279 -- the uniform percentage increase approach which establishes vastly different standards for different manufacturers. This fundamentally flawed approach will create a number of perverse effects -- not the least of which is that it will not achieve the anticipated fuel savings. First, different standards for different companies penalize those that have done the most. Never again will any company have an incentive to exceed regulatory standards -- for fuel economy, emissions or safety -- lest that performance become the baseline for discriminatory new government standards. Second, assuming hypothetically a 20 percent increase, a company achieving 28 mpg in 1996 could be rewarded with credits, while Toyota could be penalized for achieving 36 mpg -- 6/10th's of a mile short of its standard. The logic of this approach escapes us. Third -- and most important -- the desired fuel economy gains will not be realized. We firmly believe this unintended result will occur for two reasons: 1) the market will shift to less fuel-efficient vehicles; and, 2) the uniform percentage increase approach creates substantial opportunity to "game" the system. The anti-competitive effects of this approach would assure that fuelefficient leaders, like Toyota, would be legislated out of certain markets where we currently offer a higher mileage choice for American consumers. Many of the most fuel-efficient vehicles would be replaced with less fuel-efficient vehicles. This effect will frustrate the fuel savings goals of CAFE. Moreover, as the globalization of our industry has matured, the interrelationships among automakers have materialized and accelerated for a variety of sensible competitive reasons: technology transfer, equity needs and market expansion are just a few. The uniform percentage approach is likely to provide an unexpected reason for entering into these arrangements -- to "game" the system in order to minimize CAFE requirements. Attachment III is a copy of my April 3, 1991, letter to Committee Chairman Johnston which discusses the "gaming," issue in detail. |