EDITORIAL: Attention Wall Street Journal - Ford does not use Toyota's hybrid system!
by Sam Abuelsamid on Jul 3rd 2009 at 8:02AM 
2010 Mercury Milan Hybrid - Click above for high-res image gallery
in an op-ed piece published in the Wall Street Journal, Alan Reynolds of the Cato Institute starts by making a few decent points about fuel taxation and fuel economy rules. Unfortunately, he undermines himself with some blatant errors and misinformation. In discussing how Detroit automakers will deal with new fuel efficiency requirements, he makes the all-too-common mistake of referring to Ford's hybrid system as licensed from Toyota ("Similarly, Ford has the Toyota-licensed hybrid Fusion and will soon produce the European Ford Fiesta in Mexico").
The reality is that Ford independently developed its own hybrid system at the same time Toyota was doing its own. The basic architecture of both systems is the same and both are based on the concepts developed and patented by TRW engineers in the late 1960s. When Ford introduced the Escape Hybrid, Toyota went after the Blue Oval for infringing on its patents. Ford had patents of its own on the technology that Toyota was using. Eventually, the two companies reached a cross-licensing agreement that gives both companies the right to build their own systems. Such cross-licensing agreements are common in these kinds of cases, but Ford did not use the Toyota hybrid system. The only other company that uses Toyota's system is Nissan for its Altima hybrid, and they actually buy hardware from Toyota. We continue deconstructing Reynolds' arguments after the jump
Gallery: Review: 2010 Mercury Milan Hybrid
[Source: Wall Street Journal]
Photos Copyright ©2009 Sam Abuelsamid / Weblogs, Inc.
Reynolds explains that Toyota can sell big fuel guzzling vehicles like the Tundra and Lexus LS because it also sells efficient vehicles like the Yaris and Corolla. While this is partly true because the higher mileage of the small cars does offset the higher consumption of the bigger vehicles when calculating the fleet average, there is more to the story. Toyota's big trucks have not been nearly as commercially successful as any of the domestic competitors, including lowly Chrysler. As a result, there is not nearly as big a penalty to offset. This is even more true for Nissan. The LS also sells in comparatively small numbers, with only 20,255 units moved in 2008.
The author does give due credit to Ford for its upcoming Fiesta and Chrysler for the Fiats it will soon sell, but goes on to trash GM for the coming Cruze which no one has driven yet. This is certainly disingenuous since there is no guarantee that the Fiats will be any better than GM's offerings. We've driven the Fiesta and its a great little car and the new Focus will likely be very good as well.
While the current Aveo leaves a lot to be desired, it's at the end of its lifecycle and it will be replaced by the end of next year with a new American-built car. The Aveo replacement will be joined by the Spark which will also help. GM's future lineup looks just as promising as any other automaker at this point until we have a chance to drive them all.
Gallery: 2010 Chevy Spark
The main point of Reynold's treatise is a complaint about fuel economy standards being an ineffective means to influence fuel consumption. To a large degree he is correct because CAFE has limited influence unless fuel prices also rise. Simply controlling what is supplied by automakers does not guarantee that consumers will buy more efficient vehicles. Reynolds advocates adjusting the taxes on fuel to make ethanol, gasoline diesel equal at 24 cents a gallon. While the taxes should be adjusted, they need to go substantially higher if they are to have any real impact on consumer behavior. The tipping point, as we saw in 2008, is fuel prices somewhere above $3.50 per gallon. Politicians of course are too spineless to make such a change along with other changes like payroll tax reductions to compensate. Thanks to Reuven for the tip!
Reader Comments (Page 1 of 2)
the4thheat 10:37AM (7/03/2009)
Ford cross-licensed with Toyota but they traded other patents to get the license for the hybrid technology in question. They didn't have to pay cash, but they did end up trading clean diesel patents to Toyota. Obviously both companies got something out of it, but you're making it sound like Ford had a ton of hybrid system patents of it's own that it cross-licensed with Toyota which just isn't the case.
BTW Toyota wasn't infringing on any Ford patents-Ford traded licenses for stuff Toyota wanted to pursue itself, since Toyota wouldn't have had to jump through hoops to build clean diesels without getting the Ford patents, but Toyota didn't have any existing diesel engines that used Ford patents. You're just making nonsense up.
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the4thheat 10:40AM (7/03/2009)
BTW I'm not trashing Ford and I think their current hybrids are quite nice, but frankly it would be rather hard for anybody to build a competitive 2-mode gasoline hybrid now without spending ridiculous amounts of money just to avoid Toyota's patents. There's over 2000 patents on the HSD system.
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LaughingTooHard 11:40AM (7/03/2009)
the4thheat,
Just wondering are you on the WSJ or Toyota blog payroll?
Your post is just a re-hash of the WSJ article but here is the link to the TRW patent:
http://www.google.com/patents?id=sDtsAAAAEBAJ&dq=Baruch+Berman
Interesting is the pending cases of hybrid patent infringement against Toyota. And the one they lost already. How many more will pop up? Patent Trolls are very patient folk. Will it hurt Toyota? Not likely, but why should size/power/wealth have anything to do Patent enforcement/infringement?
Patent hording is a very effective way to make money, even if you didn't invent what you own the patent for.
Overall, this whole nonsense is just another sign the patent system is useless and needs to be overhauled. Drug patents is what technology patents should look like - 7 years then it is open to copying.
At least it would help companies to improve and innovate, rather than horde and sue.
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the4thheat 1:07PM (7/06/2009)
So what? I never said other people didn't have valid patent licenses. And the lawsuit they lost was for using a microprocessor to control the powertrain which would apply to every other hybrid too. They just sued Toyota because they sell the most hybrids since it's a $25 per car royalty.
Either way my only point was that paying with a cross license of diesel patents isn't the same as refuting the patent and not paying, which is what this post suggests. Since Ford was willing to swap patents it means the patent was legitimate in Ford's eyes.
rob 11:48AM (7/03/2009)
It may not be the case any longer, but the 1st gen hybrid Escape used a transmission purchased from a subsidiary of Toyota. Maybe it was a Ford design, but it was built by the same people that were building the Prius powertrain at that time.
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Sam Abuelsamid 12:25PM (7/03/2009)
Ford's hybrid transmissions are manufactured by Japanese supplier Aisin. Aisin supplies a variety of parts and systems to many automakers around the world including but not limited to Ford and Toyota. Aisin is not owned by Toyota, but I believe they do also build the rear drive hybrid transmissions used in the Lexus GS and LS.
ziv 4:39PM (7/03/2009)
Rob, the transmission/cvt Ford uses is built by Aisin, and Toyota owns 20% of the company. The one hybrid Ford had that was priced reasonably, that Toyota didn't have any competition for, and they were only able to obtain 25,000 transmissions a year. Funny that...
But there are a lot of questions right now whether the new version of the Ford hybrids in both the Escape and the Fusion will need the cross licensing since they are so different from the original system. If Ford can get the price of these things down a touch they could sell hundreds of thousands of them. I mean, $27,000 for a Fusion, really? It is too bad because if was priced at $23,000, the FFH would make the Prius look like a poor compromise.
jpm100 3:13PM (7/03/2009)
Aisin is as tied to Toyota like Delphi is tied GM. And both Ford and Toyota went to Aisin initially for the first gen of of their current hybrid systems.
You can draw what the industry calls a 'powerflow' and the two systems are identical at that level. All the other makers have avoided copying that powerflow for a reason.
Sam 12:16PM (7/03/2009)
I always was under the impression Toyota traded direct injection technology from Ford in turn for use of their hybrid system. Is a trade not a licence?
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paulwesterberg 1:13PM (7/03/2009)
The Cato Institute is rarely a source of truthful information. Lies, misrepresentation and half truths are par for the course.
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kelah 10:16PM (7/06/2009)
It is intellectually dishonest and slanderous to make such statements as above.
In my opinion Cato Institute usually gets it right. It has taken both republican and democrats to task for their respective spin doctoring. The writer probably is offended that Cato took to task one of their sacred cows and showed the flaws in it
While there were some detail errors in the article, that should have been corrected, the overall message is correct.
usbseawolf2000 7:16PM (7/03/2009)
"The reality is that Ford independently developed its own hybrid system at the same time Toyota was doing its own."
According to "The Prius That Shook The World" book, project G21 started in 1994. The original Prius was sold in Japan in 1997. It was designed, tested and mass produced in 3 years!
Ford Escape Hybrid was sold in 2004. How can Ford be developing their system at the same time as Toyota when they Prius was done by 1997? The gap is 7 years. Did Ford start developing between 1994 and 1997? If that is the case, why did it take them about 7-10 years?
No matter how you look at it, things doesn't add up.
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Kaida 8:37PM (7/03/2009)
What bothers me about Ford and I was long until going short this week-I purchased puts-is consumer spending accounts for 70% of our economy. Second, both Chrysler and GM will emerge from bankruptcy debt -free as opposed to Fords {17 Billion} equity short fall.
Finally, Toyota has close to 2,000 patents filed for new technology.
To summarize by decision is what goes up the quickest during this cyclical bull-rally in a bear market will come down the quickest.History usually repeats itself and during a similar rally at the turn of 1970 a junk rally-very similar to this current one-had the same up then eventual down..
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9394 2:19AM (7/06/2009)
From NYT, "Similarly, Ford has the Toyota-licensed hybrid Fusion..."
Actually, NYT is 100% correct. Ford did license the technology from Toyota. That's why Honda, GM, etc has to workaround from the patents held of Toyota (IMA, 2-mode, etc). No one else can build a hybrid system similar to Toyota's, even if you design and build your own parts.
Patents are designed to protect innovations. Every car manufacturer knows how the Toyota hybrid system works by tearing down a Prius and reverse engineer it. But only Toyota can build the system, unless they license from Toyota, which Ford did.
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spa2nky1 10:40AM (7/06/2009)
Similar to an article I read in the Detroit Free Press shortly before GM entered bankruptcy (which I can't find at the moment...), which used the Pontiac Vibe as an example of GM's "redundant" models...then went on to say that if the Vibe was produced and sold by Toyota it would have done much better.......
Until that point I had never wanted to write a 'letter to the editor'
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axio.matik 2:51PM (7/06/2009)
Lots of misinformation in these comments.
Ford developed their own hybrid system, of their very own design. The wording "Toyota-licensed hybrid Fusion" suggests that Ford went to Toyota, and asked if they could use Toyota's system in Ford cars. This is not correct (it is, however, what Nissan did).
Ford developed their own hybrid system, but during the development process, realized that they could not build the system they wanted without infiringing on patents held by Toyota. So, Ford and Toyota struck up a deal where they exchanged patent licensing between them. Ford got permission to use Toyota's patents, and Toyota got to use some of Ford's patents (I believe they were for direct ignition).
Toyota did start development of the Hybrid Synergy drive in 1994, as a result of being shut out of the PNGV program (look up Partnership for a New Generation of Vehicles for more info). Basically, in 1993, under the Clinton Administration, PNGV was formed to provide government funding and support for a new generation of high-mileage vehicles. Toyota wanted to join, but was shut out. Under PNGV, the domestic manufacturers researched many different high-efficiency technologies, one of the most prominent being hybrid powertrains. Toyota, fearing that they would be left in the dust technology-wise, worked on developing their own hybrid system in Japan. In the US, the rise in popularity of SUVs coupled with historically low gas prices ultimately led to the demise of the program. The domestic three abandoned their research, and Toyota continued, and the rest is history.
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axio.matik 2:53PM (7/06/2009)
Typo: Ford's patents should read "direct injection".
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rm 8:00AM (7/07/2009)
Just because Ford's system is similar to Toyota's it does not mean that they copied them. The basic system was conceived in the 70s. There are specific details that Toyota patented but sometimes it is easier to do a patent usage swap than to try to design around or fight the patents. This does not mean the technology was "licensed" which implies that Toyota told Ford how to do something. This did not happen. Ford refined a 30 year old system (using the same supplier) completely independent of Toyota.
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frankbank 8:15AM (7/07/2009)
The facts are:
The Ford hybrid transaxle was not developed by Ford, but rather by Toyota subsidiary, Aisin. it is not a Ford design, but is an Aisin-designed and produced transaxle its origins go back to the mid 90's when ther was a competition within Toyota for the Prius transaxle and both the Aisin (2 axis) and internal Toyota (1 axis designs) were designed and prototyped. The single axis design was chosen and Aisin was to find a customer for the second place design. Volvo started a development with Aisin at that time.
Ford learned of the Aisin hybrid transaxle when they bought Volvo. Ford needed to ask permission from Toyota in order to continue the relationship that Volvo started with Aisin. Toyota agreed to help anxious to find another major OEM who they could use for PR purposes to validate #1 the idea of full hbrids and #2 the idea that others companies are following them, confirming their "green leadership" street cred they were seeking.
Ford pushed ahead, but had difficulty controlling the hybrid properly. They discreetly asked Toyota for controls help. As Toyota helped Ford,them the patent cross- licensing issue came up since Toyota offered patented controls technology to Ford to fixthe issues. Ford gave non-hybrid patent rights in return. But Toyota dishonorably "leaked" to the press that they licensed hybrid technology to Ford.
You may recall at one point Ford complained in the press that Toyota was restricting volumes of these transaxles made available to them. This was Toyota making sure that Ford understood its place as a follower. Ford has had to fight the PR on this for 7 years now, but there is some truth to the characterization.
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rm 9:10AM (7/07/2009)
I do not know where to start on all the incorrect statements from frankbank. I can tell you from personal knowledge that with out a doubt, Ford was Never given help by Toyota for controls issues. Ford's developments of this system was completely independent of Toyota and, in fact, in most aspects, Ford does a better job controlling their powertrain. Ford achieves better torque blending during engine start/stops, higher electric only speeds, higher regen braking energy recovery, better vehicle stability, and an overall better driving experience, even when compared with the Lexus vehicles which cost twice as much. I can also tell you that Toyota is scrambling right now to try to figure out how Ford achieved 8 mpg higher (25% better) fuel economy and more refined drivability on a vehicle which is essentially the same (Fusion vs. Camry) despite the fact that the Fusion is 200 lbs heavier.