Toyota Engine Business Week Story 11/25/96
Toyota Cost Reduced Engine Article 
Business Week 25 November 1996 pg. 36


At an otherwise humdrum media reception in Tokyo on Nov. 8, a Toyota Motor Corp. executive, Finance Director Ryuji Araki, let slip a bit of information that sent shock waves through Detroit. He said a new engine his company is introducing has far fewer parts than the norm and could be as much as one-third cheaper to build. Immediately, faxes flew between Detroit and Tokyo as worried U.S. executives tried unsuccessfully to dope out what Toyota (which quickly went mum) has up its sleeve. The reason: Engines are rapidly becoming the new competitive battleground among cost-conscious auto makers. ''It is the next frontier in cost-cutting for all manufacturers,'' says Wesley Brown, auto consultant at CSM Forecasting in Farmington Hills, Mich.

''DELICATE BALANCE.'' Engines account for $1,500 to $5,000 of a car's total cost and can contain more than 1,000 parts. The quandary for Japanese auto makers is that they have built their reputations on developing costly, high-tech overhead cam engines that pack plenty of power into a small footprint. But Toyota realized two years ago that its engines had become too costly and complex, and initiated a program, known as PC21, to cut costs 50% by 2000. ''They have to strike a delicate balance between cutting cost and maintaining their reputation [for performance and quality],'' says Dave Andrea, an analyst with Roney & Co. in Detroit.

Just how to achieve big cost savings from engines is rekindling an old debate that pits General Motors Corp. against the rest of the industry. GM, because it could not afford to develop costly overhead cam engines, has stuck with the old push-rod design on most models. Such engines kick out lots of power and were the warhorses that made Detroit famous. Rods push upward from a camshaft located down in the engine's block and force open the valves that allow fuel and air into the cylinders. The problem is that push-rods historically have been gas-guzzlers and pollution-belchers. Overhead cams, by contrast, are peppy gas-sippers, because they push open the valves more efficiently, from the engine's top.

But GM has vastly improved the performance and fuel economy of push-rods and argues that such engines are the low-tech answer to the industry's affordability crisis. They're cheap to produce, for one thing, because they can have one-third fewer parts than overhead cam engines. ''Most of the American public has no idea what an overhead cam is,'' argues Don Pozniak, manager of technical applications for GM Powertrain Group. ''Your competitive advantage is in your pricing.''

Still, the rest of Detroit is taking the same road as the Japanese. By 2000, Ford and Chrysler will equip the majority of their vehicles with overhead cam engines. Indeed, on Nov. 12, Chrysler introduced a new family of overhead cam engines that are 10% more fuel-efficient and 25% more powerful than the mostly push-rod ones they replace. ''Eventually, GM will have to spend some money and get with the rest of the world,'' predicts James Clarke, Ford's chief engineer of advanced power-train development.

Some Detroiters optimistically speculate that Toyota will retreat to push-rod engines to achieve startling cost savings. But the greater fear is that Toyota has found a way to make its high-tech overhead cam engines much more cheaply. ''They may very well have made some breakthrough,'' says Francois Castaing, Chrysler's executive vice-president for engineering. If so, Detroit will once again be playing catch-up.

By Keith Naughton in Detroit, with Edith Hill Updike in Tokyo
Copyright 1996, by The McGraw-Hill Companies Inc. All rights reserved.

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