Hybrid Technology: When Government Takes a Stake

From the National Post: Toyota slams Ontario’s plan to jolt hybrid sales

Toyota Motor Corp. is raising concerns over the Ontario government’s plan to offer rebates of up to $10,000 to people who buy plug-in hybrid and battery electric vehicles, saying the move looks like a deliberate ploy to help General Motors Co. — of which the provincial and federal governments are now minority shareholders….

(Now, to clarify: Toyota does make hybrid cars, but they’re behind GM in the specific kind of hybrid that the Ontario government is favouring.)

Basically, the accusation is that the government of Ontario is in a conflict of interest — and evidence of that conflict is to be seen in the government’s decision to favour one technology over another, with differential impact on auto-makers, including the one it now has a stake in. In essence, the Ontario government (and, through it, Ontario taxpayers) are now shareholders in GM, and are hence now in competition with shareholders of other companies.

Of course, there’s room for broader criticism. According to one industry analyst (Dennis DesRosiers) cited in the Post story:

A cynic would say this is just government subsidizing a product that is produced by a company they own. I think that is a bit too cynical. I just think it is bad policy from a variety of perspectives.

Perhaps what Mr. DesRosier has in mind is a worry (voiced by many already with regard to the auto-industry bailout) about government’s involvement in private industry. One relevant sub-set of such worries has to do with government attempting to influence decisions — including decisions about competing novel technologies — better left to the market. Not that there’s necessarily anything wrong with government promoting socially-beneficial technological change, but in the present case, it’s not clear that it’s time to declare one particular sub-type of hybrid best in that regard.

(p.s. On the issue of government involvement in industry, I found the following scholarly paper tremendously useful. It’s closely related to the topic at hand: Stakeholder Theory, Corporate Governance and Public Management: What can the History of State-Run Enterprises Teach us in the Post-Enron era? by Joseph Heath and Wayne Norman)

3 comments so far

  1. DarryleHuffman on

    In reading the report and what you said I could see how the Ontario would want to select GM’S product. They have stake in the company. It mentions Enron where they had Author Anderson doing two jobs for them. First Author Anderson did the auditing of Enron and second they did consulting. The same holds true in this instance. First you have Ontario being a stakeholder and also being a regulating body. This was a conflict of interest. This leads to the question Can Ontario regulate and also be a stakeholder?
    What concerns me the most is them giving rebates to purchase GM’S hybrid. They would want to say this because they have an interest If they give rebate because it helps them sell and thereby the stakeholders value is increased.
    Regulators need to be unbiased so they can regulate all industries fairly.

  2. Pascal on

    Beyond the conflict of interests issue, I see another question here : government taking sides in technical / scientific debate.

    Nobody can say for sure now, wether plug-in hybrids are better than gasoline-electric hybrids. Even Toyota whos has both and is 5-7 years ahead is “not entirely convinced”.

    Government should follow a process to share such decisions with the scientific / industrial community,e.g. establish some transparent “panel” accepted by all.

    Letting governements decide on science, philosophy, religion has led to episodes in history that I at least, would not want to see coming back.

  3. DarryleHuffman on

    Thats true Pascal. They need to let science come to terms and find out with thier community first before passing judgement. Thats like putting the cart before the horse.


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