Hybrid Cars

[paul]

Have you pulled your car up to the gas pump lately and been shocked by the high price of gasoline? As the pump clicked past $20, $30, $40 or even $50, maybe you thought about trading in your car for something that gets better mileage. Or maybe you're worried that your car is contributing to the greenhouse effect.
The auto industry has the technology to address these concerns. It's the hybrid car. There are a lot of hybrid models on the market these days, and most automobile manufacturers have announced plans to manufacture their own versions.
Many people have probably owned a hybrid vehicle at some point. For example, a mo-ped (a motorized pedal bike) is a type of hybrid because it combines the power of a gasoline engine with the pedal power of its rider. In fact, hybrid vehicles are all around us. Most of the locomotives we see pulling trains are diesel-electric hybrids. Cities like Seattle have diesel-electric buses -- these can draw electric power from overhead wires or run on diesel when they are away from the wires. Giant mining trucks are often diesel-electric hybrids. Submarines are also hybrid vehicles -- some are nuclear-electric and some are diesel-electric. Any vehicle that combines two or more sources of power that can directly or indirectly provide propulsion power is a hybrid. Most hybrid cars on the road right now are gasoline-electric hybrids, although French car maker PSA Peugeot Citroen has two diesel-electric hybrid cars in the works. Gasoline hybrids are the kind you'll find at your local car dealership.

[greencat]

Prius became a green car icon several years ago, engineers at archrival Honda (NYSE:HMC - News) felt pressured. They wanted to win back the title of No. 1 green automaker.

It was a tall order. Players that lose their footing to rivals sometimes keep stumbling. But in Honda's case, the Japanese carmaker proved it could challenge Prius.

Honda's effort offers valuable lessons on what it takes for a No. 2 to take on an industry king in product development.

Honda was the first carmaker to introduce a hybrid in the U.S. market, with the 1999 Insight. The car beat Prius on fuel efficiency. But the two-seat Insight barely sold. Also, sales of another model, the Civic hybrid, fell behind Prius.

Honda's biggest obstacle was making a hybrid for under $20,000. This was because it believed even environmentally conscious consumers wouldn't pay more for a hybrid car. In the end, Honda hit its mark. The new Insight began selling in the U.S. this March for $19,800 with over 9,800 units sold by the end of July.

How Honda developed its latest version of the Insight offers tips on developing new products.

When Yasunari Seki, a veteran Honda engineer, was picked to design the new Insight in January 2006, he had zero experience in working on hybrid cars. "The only knowledge I had about a hybrid car was: It runs on batteries and motors," Seki said.

Moreover, Seki faced a tough deadline and pressure to cut costs. Plus, half of his team's engineers had never driven hybrids.

But Seki cleared the hurdles. The new Insight rolled out in Japan in February and became the first hybrid to top the best-seller list in Japan.

Using A Blank Slate

Seki saw his team's lack of experience in hybrids as an advantage.

After the team test-drove every hybrid available, Seki asked engineers to write down their impressions. "Opinions from people who have never driven a hybrid car were extremely important," he said. "Because those are the closest to what customers would feel."

Seki found that first-time hybrid drivers felt awkward because hybrids don't have the quick responsiveness of traditional gasoline cars.

So he set out to make a car that didn't force drivers to sacrifice the fun-to-drive feeling for mileage.

Then, his team leaders came up with a specific goal and numbers to achieve a responsiveness similar to gasoline cars.

Seki, 51, has devoted his career to creating the "greenest" engine possible. He was in a team that created ultra-low-emission engines for the Honda Accord, and he became a clean diesel engine specialist. Cost was never an issue.

But this time, cost-cutting was a must to meet the new Insight's price target.

To cut material costs, he asked his engineers to cut an additional 0.35 ounce from each of the vehicle's 1,300 parts, achieving an extra 28-pound weight reduction.

Meanwhile, Honda's president at the time, Takeo Fukui, shocked Seki by publicly announcing in May 2006 that Honda would sell an affordable and improved hybrid by early 2009.

Seki, who hadn't been told about the deadline, couldn't believe it.

It took Toyota 41/2 years to remodel its Prius. But Honda only had three years.

Fukui said to Seki, "Oh, it slipped." Seki's team had only a clay model, not even a prototype.

But it was Honda's way: publicly announcing a near-impossible deadline and pressuring its engineers to find a way to achieve it.

That's how Honda's CVCC engine became the first to pass the U.S. Environmental Protection Agency's strict emission requirement in 1975.

Seki broke down the tasks into smaller goals to meet the deadline. "The key is to focus on what we have to do 'now' to achieve the final goal," he said.

Brainstorming Sessions

Seki also called a waigaya -- or brainstorming session -- to support his project.

The sessions are a big part of Honda's corporate culture. Company execs sit next to each other in one room, making it easy for them to talk whenever needed, says Akimasa Yasuoka, senior vice president of American Honda Motor.

In the waigaya sessions, younger engineers designed a display for Insight owners that grades drivers' eco-driving skills. When drivers operate the vehicle in a fuel-efficient manner, digital images of "leaves" on a dash display start growing.

But Honda's U.S. management balked. They said Americans would resent being taught how to drive by a video-game-like system. Seki backed the young engineers, telling an executive: "If you don't like the system, please fire me."

American Honda says U.S. consumers generally liked the system despite the initial qualms.

Toyota wasn't sitting idle while Honda was revamping its new Insight. Development of Toyota's latest third-generation Prius, which came out this past May, was led by Akihiko Ohtsuka, a veteran hybrid engineer. Toyota says it slashed costs on the hybrid system by two-thirds vs. the first-generation Prius.

"We easily have more than 10 years of experience ... (and) more than a decade of feedback from our customers," Toyota spokesman Paul Nolasco said in an e-mail about the Prius project. "We believe that this feedback is an extremely valuable asset that gives us an advantage over other manufacturers."

Toyota scored other points. Honda's new Insight gets 40 mpg in the city, less than the Prius' 51 mpg, according to U.S. government estimates.

Nikko Citi analyst Noriyuki Matsushima says it's hard to compare the two cars since Prius is larger than Insight and the cars use different hybrid systems. Prius relies more on electric power, while Insight uses electricity as an aid, he says.

Matsushima says Toyota deserves credit for developing a mass-production hybrid car when other carmakers downplayed the technology because it wasn't profitable.

Masaaki Sato, author of "The Honda Myth," believes Honda stands out because it goes its own way. But he says its weakness is that founder Soichiro Honda's creative DNA and his challenging spirit could be embraced by other executives but not inherited by future bosses.

Honda's Yasuoka, a former Formula One racing team chief, disagrees. He says Honda's racing spirit still animates its green-technology program.

"The best part of racing is that our mistakes are watched by the public in real time," Yasuoka said. "It's humiliating. But that's what makes your products improve the fastest."