Toyota considers entry into making single-engine planes.

Southland-based car exec spearheads aircraft project

Japanese automobile titan Toyota Motor Corp. is laying the groundwork to produce a new, single-engine airplane.

In an exclusive interview with the Business Journal, Toyota's senior executive in America, Yuki Togo, said the project could be submitted to Toyota's board of directors in Japan for approval later this year. He said some manufacturing could take place in the United States.

Burt Rutan, the world-renowned aeronautical engineer whose "Voyager" aircraft set a world record circling the earth, has already built a prototype airplane for Toyota.

The news is certain to draw intense interest in the depressed U.S. consumer-aviation industry, which could use new blood. Production of light-weight, single-engine aircraft has ceased at giant Cessna Aircraft Co. and is limping at many other once-prolific factories like Piper Aircraft Corp.

In Southern California, where hemorrhaging aerospace companies have cast off thousands of assembly-line workers and aircraft engineers in recent years, any new production is desperately needed.

Togo said he hopes some manufacturing, especially of engines, would be based in the United States. He declined to be more specific.

Toyota already has demonstrated its willingness to produce in America, and it has defused some anti-Japan feelings among politicians and car-buyers. In Kentucky about 3,600 American workers produce Camrys at a $1.2 billion factory. Toyota truck beds and catalytic converters are manufactured at a Long Beach plant employing about 400 workers.

Rutan, the hotshot prototype builder whose "Voyager" experiment in 1986 became the first airplane to circle the globe on one tank of fuel, works out of a large hangar at Mojave Airport, 65 miles north of downtown Los Angeles.

Togo is president and chief executive of Toyota Motor Sales U.S.A. Inc., headquarters for U.S. vehicle sales, based in Torrance.

Togo, himself a private pilot, is also Toyota's point man for its budding U.S. aircraft ventures. Toyota Aviation U.S.A. Inc. sells used business jets to Japan and runs Long Beach-based AirFlite, a small sales and service operation at Long Beach Airport.

Togo would only comment in general terms about the project.

"I'd like to build such a futuristic plane," he said during an interview last month, holding a miniature model of the six-passenger Rutan creation. It has a sleek fuselage and slender wings, rather conventional-looking compared to some of Rutan's more oddball designs that feature two pairs of wings.

The model sits on Togo's desk and was autographed in gold ink by Rutan.

"My dream is to use an automotive engine for an airplane," said Togo, commenting on industry rumors of engine conversion by the world's No. 3 automaker after General Motors Corp. and Ford Motor Co. Toyota currently produces automobile engines at roughly a 4 million-a-year clip worldwide. About 1.02 million cars were sold by American dealers last year through Toyota Motor Sales.

Foreign-owned production has precedent in America. For example, Mooney is owned by French entrepreneurs and Bombardier of Canada owns Lear Jet.

"Someday, perhaps 10 years from now, Toyota will have great airplane sales," predicted Togo.

Togo's chief of staff, Jeffrey A. Smith, downplayed involvement by the $71-billion-in-sales parent company in Japan, characterizing the plane project more as "Yuki's dream." But Smith admitted he knew few details. "Yuki hasn't talked at all to most people about this," he said.

Rutan would neither confirm nor deny the Toyota project to the Business Journal. "A lot of programs that we have with customers are proprietary," he explained. "I really can't comment unless his office asks us to," he said, hastening to add, "And I can't even confirm that he's a customer."

A Toyota-Rutan "power marriage" could reinvigorate a zombie-like industry if the Japanese firm opts to proceed and selects a U.S. manufacturing site.

In 1991 American aircraft manufacturers had their worst year in history. The 14 American-based firms delivered only 564 light, single-engine aircraft. That's down 96 percent from the post World War II high reached in 1978, when 14,398 rolled off U.S. assembly lines.

Most aviation experts blame multimillion-dollar product liability lawsuits for nearly killing off the light-aircraft industry (see story below).

On the sales side, teaming with a highly esteemed engineer who's also a celebrity could work magic for Toyota if it indeed manufacturers light aircraft for sale someday.

Rutan's name was broadcast on TV sets and radios worldwide 1986 when his "Voyager," piloted by his brother Dick Rutan and Jeana Yeager, circled the Earth in nine days. Attention was also drawn to the designer's maverick methods.

Rutan, 47, has pioneered fuselage and wing construction out of "composites," which are high-strength, light-weight engineering materials. They typically consist of a foam core sandwiched between layers of fiber-reinforced plastic.

Rutan's current high-tech prototype shop, Scaled Composites, is based in Southern California at Mojave Airport. The small factory is known for experimental configurations and quick turnaround time.

While nearly every traditional light-aircraft fuselage today is made of aluminum, a Rutan-Toyota plane would likely be composite, speculated a pilot who built an experimental aircraft in a hangar near Rutan's at Mojave. "If Burt Rutan's building it, you can believe it's composite," the pilot said.

Among more than two dozen prototypes studding his career (some of them duds) are Rutan's successful co-design of the twin turboprop Starship for Beech Aircraft Inc. and a fighter prototype for the federal Defense Advanced Research Projects Agency.

Toyota would not be alone in venturing into the tricky, small-aircraft market in America. Aerospatiale of France announced last month it will establish a plant in Texas to produce trainers. American General in Mississippi is another upstart. But overall, the market is dead.

"Welcome to an industry killed by lawyers," read a headline in The Economist recently.

Indeed, annual claims paid by the industry soared from $24 million to more than $210 million in the past decade, according to the General Aviation Manufacturers Association. This happened despite federal authorities concluding that the safety record has steadily improved since 1946 for so-called general aviation, which excludes military and airline aircraft.

Togo, however, seemed confident Toyota could surmount the liability problem.

"We have to start from scratch and build a sound airplane," he said. "If we buy some other aircraft company, we could have product liability questions," he said, noting that a newcomer would not want to inherit an aged fleet and its liabilities.

Growing liability hassles ground U.S. small-plane manufacturing

Jury awards to crippled small-aircraft pilots, and to the families of deceased fliers, have headed into the stratosphere in America.

Beech Aircraft Inc. was sued 203 times just between 1983 and 1986. The Wichita, Kan., company spent on average $530,000 to see through each case.

"That's well over $100 million bled through the courtroom doors," complained spokesman Henry Ogrodzinski of the General Aviation Manufacturers Association.

In recent years insurers reacted by steepening premiums for manufacturers of light aircraft and related parts. That and other factors have nearly killed off the market's low end, where light-weight, piston-engine aircraft are produced primarily for pleasure uses, but seem to draw the most lawsuits.

Some aviation experts say this has favored entry of new, foreign competition in the small-aircraft market. Foreign-based firms are generally considered harder to sue, say the experts.

Higher costs and legal aggravation for the 14 American-based manufacturers have effectively killed their low-end production, if not the entire company.

"Product liability put us into Chapter 11," said Lee Walther, director of marketing for Piper Aircraft Corp. The 55-year-old manufacturer located in Vero Beach, Fla., was forced to seek bankruptcy protection last year after collapsing under the weight of lawsuits, along with other problems. The $126 million-in-revenues company is currently negotiating to build its next plant in Canada.

Insurers consider younger planes a lesser risk, benefiting upstarts like Aerospatiale. It began selling planes in America in earnest in 1984 and has only about 300 rather young models in circulation, vs. 130,000 Cessnas, most far older.

Further, Aerospatiale is owned by Socata, a French corporation based near Paris, so the lawsuit demon is controllable, claimed Ogrodzinski, "Attacking assets in Paris would be very difficult," he said.

Monroe disagrees somewhat, noting his firm has been sued in America. Gaining foreign documents is the biggest challenge to a plaintiff, he said.

Some ailing manufacturers have done well by expanding into business-class aircraft, such Cessna's popular Citation line. Cessna's metamorphosis from the most prolific light-aircraft maker to a commercial-grade powerhouse helped it generate $598 million in revenues last year. That ranked Cessna No. 2 among makers of general-aviation aircraft, which is all pleasure and business aircraft except those for airline and military use.

At the market's high end, the situation is different. Production of so-called business aircraft, generally powered by turboprops or jets, suffer far fewer back-breaking legal attacks. Typically, jet pilots are better trained, their aircraft is better maintained and passengers are often covered by the business-owners' insurance.

But with small aircraft, the situation is ugly.

The advantages to foreign enterprises are quite technical and often disputed.

"I think almost anybody in the industry will tell you it's easier to recover damages from a domestic, but I don't know why," said Steve Brown, senior vice president of government affairs for Aircraft Owners & Pilots Association.

Stanley J. Green, attorney for the General Aviation Manufacturers Association, said "lax" court rules here allow a plaintiff armed with a subpoena to effectively browse among a company's documents looking for ammo to support an accident theory. "In America, you can go fishing," he said, "but abroad, there's only target-shooting."

Foreign courts usually require that only specific documents directly linked to proven accident causes be divulged. "What you get out of a French court, for instance, is far, far, far less," he said.

Foreign assets can be harder to seize, too, he added.

But the picture is not black and white.

A number of manufacturers lost touch with customer tastes in the last two decades, said Bill Monroe, vice president of sales and marketing at Aerospatiale General Aviation of Grand Prarie, Texas.

Also, he said, new aircraft must compete with planes dating from the 1940s that still fly, thanks to mandatory annual inspections and good maintenance. "The industry is competing against itself," said Monroe.

The average age of a small plane in America is about 25 years. Even a plane from the 1970s is bound to be in better condition than a car from that decade.