Hybrids Won't Be Money Makers

General Motors Corp. President and CEO Rick Wagoner, Ford Motor Co. head of North American Automotive Operations Martin Inglis and DaimlerChrysler Corp. President James Holden appear in agreement about hybrid-powered vehicles: Their respective companies aren't planning on profits from their initial hybrid efforts.

Mr. Holden says that DC projections of a 100,000-unit build for its now-prototype hybrid Durango show the vehicle would have to sell at a price "penalty" of $1,500 to $3,000 - meaning the company would lose that much on each of the hybrid sport/utility vehicles (SUVs) it sold.

Meanwhile, Ford's Mr. Inglis intimates that when it launches a hybrid-powered version of its new Escape SUV in 2003, Ford also will have to sell its hybrid SUV at a loss.

Mr. Wagoner, without mentioning how these cost concerns relate to GM's recently announced plan to sell hybrid-powered pickups in 2004, adds that the business case for hybrids "might be more compelling in other countries, particularly in Europe," where exorbitant fuel costs could inspire customers to pay a meaningful premium for hybrids.

Mr. Holden adds that the "lack of a fuel policy" in the U.S. means consumers aren't driven to pay a higher price for vehicles that promise increased fuel economy, yet regulators continue to press for enhanced fuel economy and reduced emissions.

The two auto companies currently selling hybrid-powered vehicles in the U.S., Honda Motor Co. Ltd. (Insight) and Toyota Motor Corp. (Prius), are believed to be selling the vehicles at a substantial loss.

Mr. Holden also suggests that hybrid SUVs initially might force buyers to accept certain other compromises, particularly in towing capacity. "If you've got a 28-foot boat, you probably don't want a hybrid - at least as we envision them today."

All agree, however, that the eventual goal for hybrids is to increase every measure of performance.