Fueled by steady growth in sales and earnings since the start of the decade, Japanese auto makers are pouring record sums of money into research and development. In this final installment of a 4-part series, Ward’s discusses trends with Toyota research and development head Kazuo Okamoto.

TOKYO – Toyota Motor Corp. will continue expanding hybrid-electric vehicle technology across all product lines, the auto maker’s top research and development executive says in an interview.

And although it is in the final stages of developing lithium-ion battery technology, Kazuo Okamoto, executive vice president in charge of R&D management, product development and vehicle engineering, says the differences between Li-ion and nickel-metal-hydride “is not as great as many think.”

Okamato also says Toyota is working on hybrids that will achieve greater fuel efficiency in highway driving.

Additionally, the auto maker will have diesels ready for the U.S. and Japan should demand arise and it currently is studying a V-8 diesel for truck applications, the Toyota executive says.

Okamato, 69, joined Toyota in 1967 and now oversees a research budget that has grown to more than ¥950 billion ($8 billion) annually. Globally, the auto maker employs 30,000 technical personnel at research centers in Japan, North America, Europe and Asia and plans to raise that number to more than 35,000 by 2010. Here are excerpts from the interview:

Ward’s: How do you separate the Toyota and Lexus brands from a product-development standpoint?

Okamoto: As you may know, we have two development centers, one for Lexus and the other for Toyota. For advanced technologies such as powertrains, we (generally) develop them for Lexus first. Then all Lexus components and systems developed must meet quality and performance standards set by our Lexus “MUST” program. (With the September 2006 launch of the LS 460, Toyota began requiring each new Lexus model to meet some 500 special standards known as Lexus MUSTs. These range from cabin quietness to steering responsiveness.)

Ward’s: And gradually those Lexus technologies – over five, six or seven years – filter into the Toyota brand?

Okamoto: Yes, but there’s no clear timeframe. It varies by technology.

Ward’s: At the Tokyo Motor Show, you again displayed the LF-A, a future Lexus super sports car first shown in Detroit in 2005. It now seems close to production-ready. When will you launch the model?

Okamoto: We want to perfect it to the level of art before introducing it.

Ward’s: Does that mean raising driving performance to the industry’s highest level – Toyota earlier announced the LF-A’s powerplant would produce more than 500 hp?

Okamoto: Our focus is much broader than power and performance. It includes the interior, everything.

Ward’s: On the powertrain side, will the LF-A offer something new and different? Might it, for instance, employ Toyota’s hybrid technology?

Okamoto: The car is currently fitted with a (mid-mounted) V-10.

Ward’s: Switching subjects, will the new Prius adopt a Li-ion battery?

Okamoto: No. It will be nickel-metal-hydride. While in the future we expect all batteries to be lithium, we don’t think the technology is ready yet for mass-production cars. And the Prius is a mass-production car.

Ward’s: When will Toyota introduce a Li-ion battery – in 2010?

Okamoto: That might be difficult, but clearly we want to be ready in that timeframe.

Ward’s: Have you overcome all safety problems with Li-ion?

Okamoto: For the most part, yes. But a bigger problem with lithium is durability. We want to develop a battery that can be used through the life of the car. In Europe, that is around 15 years. We are currently in the final stages of developing such a battery.

Ward’s: Nissan (Motor Co. Ltd.) indicated it might introduce a mini electric vehicle powered by a Li-ion battery in 2012. Mitsubishi (Motors Corp.) plans to begin limited sales of its Li-ion-powered i-MiEV in 2009. Both auto makers are preparing for mass-market sales as early as 2015. Is Toyota behind Nissan and Mitsubishi?

Okamoto: Toyota is developing cars (hybrids, plug-in hybrids and EVs) that can run on both lithium and nickel-hydride. The difference between batteries is not as great as many think. Lithium becomes relevant when vehicle weight is a consideration. If we want to reduce weight, a smaller (Li-ion) battery is helpful.

On the issue of mass market, how does one define it? If mass market means sales of 5,000 units per month, we (Toyota) still consider that a niche market. Cars like the Camry and Corolla (both with yearly sales of about 1 million units) are mass-market cars.

Concerning Nissan’s (and Mitsubishi’s) future product plans, I would advise to wait and see the car before making a judgment. In the case of hybrids, Toyota has produced more than 1 million units to date and collected considerable market data. I don’t know what sort of data other car makers have, but we will be cautious when introducing new technologies.

Ward’s: Will Toyota eventually switch all drivetrains to hybrid, even drivetrains for small cars?

Okamoto: Eventually, yes. But this will occur gradually over time, and not just at Toyota. All car makers must move in this direction. Otherwise, (carbon-dioxide) and energy problems will worsen.

Ward’s: Do you think hybrids eventually will lose share to clean diesels in the North American market?

Okamoto: We feel that hybrids are a better alternative for passenger cars.

Ward’s: Even in highway driving?

Okamoto: Of course hybrids are very good in city driving. But they also contribute to better fuel economy in highway driving. We are currently working to improve mileage, thus reducing CO2, and expect to develop a hybrid that competes with European diesels both in fuel economy and high-speed driving.

Ward’s: Has Toyota delayed launch of the new Prius, reportedly planned for late 2008 or early 2009?

Okamoto: There is no delay. Beyond that I can’t comment on future products, including launch timing.

Ward’s: Are you on schedule to meeting your 50% cost-reduction targets for the new model?

Okamoto: We’re working on it. The idea was to reduce cost and weight of the first Prius hybrid system and second Prius hybrid system by half, then by another half, roughly speaking, between the second and third generations.

Ward’s: Will Toyota try to hybridize every vehicle in its lineup, including models like the Sienna, Sequoia and Corolla?

Okamoto: Our first goal is to produce 1 million hybrids early in the next decade. After that, we hope to make (hybrid versions of) all cars in our lineup. To do that, however, we must further reduce system cost.

Ward’s: As you move forward, will you continue to concentrate on strong hybrids or will you switch to other types?

Okamoto: We will continue to focus on strong hybrids. One reason is that plug-in hybrids (the next stage in hybridization) depend heavily on electricity.

Ward’s: Will Toyota eventually introduce a hybrid Tacoma?

Okamoto: The Tacoma is close to the limit (of our system). (It) might be better suited for diesel.

Ward’s: But diesels aren’t popular in the U.S.?

Okamoto: They’re not popular now, but there are quite a number of trucks already in the market that run on diesel, including 3/4-ton and 1-ton units. I think diesel will gradually filter down to smaller trucks.

Ward’s: Will you introduce a V-8 diesel?

Okamoto: It’s under study.

Ward’s: Honda (Motor Co. Ltd.) and Nissan have announced plans to introduce clean diesels in the U.S. in 2009 and 2010. What is Toyota’s timetable?

Okamoto: Whenever the market requires one. At this point in time there is very little demand.

Ward’s: But you are making provisions?

Okamoto: We believe that clean diesels are a must in Europe with Euro 5 and Euro 6 emission standards scheduled to come into effect in 2010 and beyond. So yes, we are making preparations. However, the U.S. and Japan are another matter, as there is still no demand for diesel in either market.

Ward’s: In Europe, you’ve announced plans to work with Isuzu (Motors Ltd.) to develop a 1.6L diesel (reportedly for launch in 2012). Is that with the aim of meeting Euro 5 standards?

Okamoto: Our project with Isuzu is for a single engine.

Ward’s: Does Toyota still have too many platforms?

Okamoto: We have already reduced the number significantly and will try to maintain the current level. The number of models, however, is growing.

Ward’s: How many platforms do you currently have?

Okamoto: It depends on how one counts, but basically two for rear-wheel-drive cars and four front-wheel-drive. That’s global platforms and include, in the case of FWD cars, the new MC, B and K platforms (respectively for the Scion xB and Corolla, Yaris and Camry).

Ward’s: And that includes or doesn’t include Lexus?

Okamoto: It includes Lexus.

Ward’s: How many truck platforms?

Okamoto: Five, including full- and medium-sized trucks like the Tundra, Tacoma and IMV.

Ward’s: How is Toyota’s $7,000 Entry Family Car project progressing?

Okamoto: I can’t say how many thousands of dollars (the vehicle will cost). But the project, which targets BRIC countries (Brazil, Russia, India, China), is progressing smoothly.

Ward’s: You have been less optimistic than many in the industry about the near-term growth prospects for fuel cells and have said it would be after 2020 or even after 2030 before the technology comes into the mainstream. That said, are you concerned there might not be enough platinum for the number of fuel-cell vehicles envisioned?

Okamoto: This is not as serious a problem as many think. The fact is, there is a great deal of platinum in the market. And of course we will, over time, significantly reduce the amounts needed. The biggest issue for the future of fuel-cell vehicles is infrastructure – whether hydrogen refueling stations are in place. The technology for fuel-cell vehicles is developing rapidly. The fueling infrastructure isn’t.

Ward’s: Do you think fuel-cell vehicles may be overtaken by electric vehicles?

Okamoto: It depends on the fueling infrastructure. If not in place, EVs may come sooner. On the other hand if, for EVs to make inroads, we must increase battery capacity substantially (that could hamper the technology’s acceptance). (But) if, for instance, we can develop a battery that runs 600 km (375 miles) and can be recharged overnight, EVs have great potential.

Ward’s: One final issue. The Toyota supplier group has undergone a great deal of restructuring in recent years. From a research and product-development standpoint, is there need for further restructuring in the group?

Okamoto: I don’t think it is necessary, though I won’t say it couldn’t happen.

Ward’s: What about Tokai Rika Co. Ltd. and Toyoda Gosei Co. Ltd., both of which seem to be at loose ends in Toyota’s supplier network?

Okamoto: Again, I see no imminent reason for these companies to merge. We’ll collaborate with them in safety technologies, steering and so on.