Toyota's Star Wars Strategy

Some say Ronald Reagan broke the Soviet Union's back when he announced the Strategic Defense Initiative (SDI) in 1983.

That is a gross oversimplification of the final years of the cold war, but SDI certainly accelerated the Soviet Union's decline.

Reagan's strategy was to force the cash-strapped Soviets to compete in an expensive technology race that he knew only the U.S. had enough money to win.

American critics claimed an orbiting missile defense shield would never work and derisively nicknamed it “Star Wars.” But whether or not the complex laser weapons system ultimately succeeded almost was not important.

The Soviets knew the balance of power would shift further in America's favor if they did not answer the SDI challenge. Yet they also knew they did not have the money to respond with their own version. In the end, it was one of the factors that forced the Soviet empire to crumble.

Fast forward to today and the same scenario may be unfolding with Toyota's massive investment in hybrid-electric vehicle (HEV) technology, the system it calls Hybrid Synergy Drive. While every other auto maker in the world says it can't figure out how to build a business case for HEVs, Toyota claims it already is making a profit on them.

And yet, even though Toyota's competitors say they can't figure out how to make money selling a $7,000 technology for $4,000, they all are scrambling to come out with their own HEVs.

Why? Because Toyota has brilliantly positioned HEVs as the technology that will save the planet. Any auto maker that doesn't have them is perceived to be run by a bunch of Neanderthals who don't know nuthin'. Ergo, they have to build them.

Toyota, being one of the world's most profitable auto makers with vast hordes of cash, can afford to spend the money to develop HEVs without putting a dent in its capital budget. No other auto maker can afford to do this — certainly not on its own.

CEO Carlos Ghosn threw up his hands and announced Nissan simply would buy the technology from Toyota rather than develop its own. Who would have ever thought we'd live to see the day that Nissan would buy anything from Toyota?

Honda embarked on its own simpler and less costly system, but for some reason it has been far less successful. Ford, perhaps foolishly, decided to pursue Toyota's technology path only to find the boys from Nagoya have effectively blocked its access to key suppliers.

The collapse of the Soviet Union left the U.S. as the sole superpower in the world. Just as nature abhors a vacuum, nation states abhor an unshackled superpower. So America's rivals are banding together to work against it.

That's happening on the HEV front, too. General Motors joined forces with DaimlerChrysler and BMW to split the costs of doing individual systems. Look for other OEMs to join this Grand Alliance. Collectively they'll achieve higher volumes and lower costs than Toyota.

But all the while they are being forced to expend precious corporate resources that none of them can afford. None but Toyota, that is.

John McElroy is editorial director of Blue Sky Productions and producer of “Autoline Detroit” for WTVS-Channel 56, Detroit and Speed Channel.