Volume 23, No.1, Spring 2005

Hybrids: Made in the USA?

 By Ashley Fingarson and Jane S. Shaw

The vehicles attracting the most attention these days are hybrids-cars that combine a gasoline engine that is used for highway driving and an electric motor operated by an electric battery for slower speeds as well as for sudden acceleration. Although hybrids still represent a small part of the market, Toyota’s Prius has "won some of the industry’s most prestigious awards," says the Economist (2004, 26), and has "generated a buzz out of all proportion to the car’s prevalence on the roads."

Hybrids accomplish much of what electric cars were supposed to—they emit few pollutants and achieve high fuel economy, often on the order of 50 or 60 miles per gallon. Unlike electric cars, they can go fast and for long distances.


American automakers have lagged behind in developing hybrids. Toyota pioneered with the Prius, which it brought to the U.S. market in 2000, and Honda now has three hybrids. Ford brought out a hybrid version of its Escape sport utility vehicle last summer, using some Toyota technology. General Motors and other automakers are planning to release hybrid SUVs in the near future.


Largely ignored is the fact that the Big Three domestic automakers—General Motors, Ford, and DaimlerChrysler— worked on hybrids in a joint project with the federal government for nearly a decade, between 1993 and 2002. It appears that little came of it, even though taxpayers invested $1.5 billion (Colella 2003).


The Partnership for a New Generation of Vehicles (PNGV) reflected the Clinton administration’s flirtation with "industrial policy." The chief goal of the government/Big Three partnership was to build a low-polluting four-door sedan that achieved 80 miles per gallon. Once concept cars were built and evaluated, pre-production cars were to be ready by 2004. Early on, the program settled on hybrids as a key technology.


But no hybrid sedan ever emerged from the Big Three, and today the program is rarely mentioned. Barry C. Lynn (2004, 1), author of a study of PNGV for Environmental Defense, says that it is "little remembered outside of Washington; in Washington, it is remembered but generally not well regarded." The domestic automakers are vague about it. Nicholas Cappa, a DaimlerChrysler spokesman, said in an interview that it is "possible" that the company’s hybrid technology stemmed from PNGV.1


Dave Barthmuss, a General Motors spokesman, says that the intention of the PNGV program never was to build a concept car; but rather to generate research and development for fuel alternatives.2 "It [PNGV] was never designed to result in a production vehicle."


Ambitious Goals, Minimal Results
But that isn’t what a committee appointed by the National Research Council seemed to think. (The Department of Commerce had asked the council, a division of the National Academies of Science, to set up a committee to follow the project and to provide peer review.) It is also at odds with the impression given by President Clinton, who called the program "a technological adventure as ambitious as any our nation has ever attempted" (Lynn 2004, 2).


The series of National Research Council reports reveals how expectations deteriorated. The first, issued in 1994, emphasized the uniqueness of the program. PNGV "establishes a government- industry partnership that is unprecedented within the U.S. automotive industry," it wrote. The goal was to develop a vehicle that would "achieve up to three times the fuel efficiency of today’s comparable vehicles (specifically the Concorde, Taurus, and Lumina) while maintaining or improving current levels of performance, size, utility, and total cost of ownership and while meeting or exceeding federal safety and emissions requirements" (National Academy of Sciences [NAS] 1994, 1). The committee called the goals "credible" and the program off to "a good start" (NAS 1994, 2).


Even then, however, a few caveats slipped through. "It was disconcerting to the committee that the PNGV . . . was unable to provide detailed and defined program plans, schedules and milestones to the committee" (NAS 1994, 2). Possibly contributing to this problem was the fact that the administration was not adding new funds to get it going. The program was to be financed by "redistribution and reallocation" of existing government funds (NAS 1994, 3).


Furthermore, neither the government nor the automakers appointed a leader or a staff within the partnership’s first year. "The PNGV does not, as yet, have program management structures that are adequately defined and staffed in either government or industry organizations" (NAS 1994, 2).


Two years later, the council noted that the Big Three automakers were not working closely together. It added that "this lack of integration is reflected in the decision of Chrysler, Ford, and General Motors to develop individual concept cars," a decision that was having "an adverse impact on the program" (NAS 1996, 21). The committee again pointed out organizational flaws—that "the government lacks an effective program management organization, with the current program management office operating essentially as an information office" (NAS 1996, 32).


By 2001, the committee was rethinking some of the basic issues surrounding the program and backing off from the goal of "the design, development, manufacture, and assembly of a production prototype by 2004" (NAS 2001, 76). It had become clear that the automakers didn’t intend to pursue the original goals, anyway. The report explained this by saying that "it would be wasteful at this point to develop a production prototype for a vehicle that could not be marketed" (NAS 2001, 81).


The Shift to SUVs
Sport utility vehicles had become a much larger part of the market. Automakers had decided to use hybrid technology to improve the fuel economy of SUVs, not to achieve an 80-miles-per- gallon goal for a mid-size sedan.


The committee actually endorsed this shift from cars to SUVs. It pointed out that because SUVs used so much gasoline, a 20 percent improvement in mileage would save more gasoline (say, 155 gallons per year) than would the same percentage reduction in a mid-size car (83 gallons). The report noted that "the current context of the partnership is sufficiently different from that in 1993" to justify the changes (NAS 2001, 10).


Indeed, even today the role of hybrids (other than as SUVs) is unclear among the Big Three. Automakers downplay them. "Hybrids have a very specific niche—stop and go traffic," says Cappa. "We have to make sure that the customer really wants it."3


So, the PNGV didn’t produce hybrids, and just what it did accomplish remains a mystery. Barry Lynn cites two "oblique" successes: spurring Japanese firms to move forward with hybrids and showing that radical technologies were available to the U.S. car manufacturers, whether they used them or not (Lynn 2004, 3). This doesn’t give one much to cheer about.


The failings of PNGV should spur caution about its replacement, the FreedomCAR project. This partnership is supposed to develop a workable hydrogen-fueled car and is expected to cost taxpayers $890 million in its first six years (Lynn 2004, 1). Announced in 2002 by Energy Secretary Spencer Abraham and expanded the following year, FreedomCAR eerily echoes the PNGV program.


FreedomCAR will pursue "technologies to enable high volume production of affordable hydrogen fuel cell vehicles, and the national hydrogen infrastructure necessary to support them." Like PNGV, it involves the Big Three and the Department of Energy, plus several oil companies. It too sets deadlines (2010 and 2015) and promises review by the National Research Council. To Dariel Colella (2003) of the National Taxpayers’ Union, "President Bush is asking us to once again support a program that is doomed to fail."


It’s time to stop kidding ourselves. We shouldn’t have expected a government program to be a success at producing a private good. Efforts to do so are called socialism, and we have learned by now that socialism is not a very promising avenue to the future.


1. Nicholas Cappa, Chrysler Communications, telephone interview, October 27, 2004.
2. Dave Barthmuss, General Motors, telephone interview, November 1, 2004.
3. Cappa interview.



Colella, Dariel. 2003. FreedomCAR: A Realistic Goal-Or Just Another Subsidy—NTU Issue Brief 142, February 21. Online: www.ntu. org/main/press_issuebriefs_printable.php?PressID=210&org_name=NTU (cited January 31, 2005).
Economist. 2004. Why the Future is Hybrid. December 4�10.
Lynn, Barry C. 2004. Today’s Promises, Tomorrow’s Cars—A Special Report. New York, NY: Environmental Defense.
National Academy of Sciences. 1994. Executive Summary. Review of the Research Program of the Partnership for a New Generation of Vehicles. Online: books.nap.edu/books/NI000055/html/1.html#pagetopl (cited May 7, 2004).
—. 1996. Review of the Research Program of the PNGV-Second Report. Online: books.nap.edu/books/NI000083/html/1.html (cited April 27, 2004).
—. 2001. Review of the Research Program of the Partnership for a New Generation of Vehicles: Seventh Report. Online: books. nap.edu/books/030907603X/html/1.html#pagetop (cited January 29, 2005).

Ashley Fingarson, a former PERC intern, is currently an intern in the Washington, D.C., office of Senator Max Baucus of Montana. Jane S. Shaw is a PERC senior fellow and editor of PERC Reports.

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