Ford Investing $420 Million for Fuel-Cell-Powered Auto

The fuel-cell-powered automobile received a dramatic boost Monday when Ford Motor Co., betting that the technology could replace the internal combustion engine, announced it will invest $420 million in a venture with Daimler-Benz and a pioneering Canadian firm to bring the vehicles to market in seven years.

The announcement signals that the world’s major auto makers increasingly believe that fuel cells are the most promising alternative-fuel technology on the horizon and could be commercialized much sooner than previously thought.

“This is real progress,” said Jason Mark, transportation analyst for the Union of Concerned Scientists, an environmental-advocacy group. “A nearly half-billion-dollar investment is nothing to sneeze at.”

Fuel cells are highly efficient devices that use hydrogen and oxygen to create electricity to power a car. The elements are combined without combustion; the only byproduct is heat and water vapor.

By some estimates, a six-passenger sedan powered by fuel cells would be 50% more fuel-efficient and have 90% fewer emissions than today’s gasoline-powered autos. They would also be as quiet as electric autos without their severe range limitations.

Although the technology still faces some significant technical and cost hurdles, auto officials expect fuel-cell vehicles to soon match conventional cars in size, range, roominess and speed.

Ford, Daimler and Ballard Power Systems of Vancouver, B.C., signed a tentative agreement Monday in Stuttgart, Germany, and said they expect to reach a final deal within a few months. The transaction is subject to regulatory and stock-exchange approvals.

The deal teams two of the world’s most powerful, technologically sophisticated auto makers--Ford and Daimler, parent of luxury car maker Mercedes-Benz--with Ballard, a producer of automotive fuel cells.

“With our collaborative efforts, we think we can accelerate the commercial viability and implementation of fuel cells,” said Ford Chairman Alex Trotman in a statement issued from Germany.

Ford’s investment comes six months after Daimler created a global stir by acquiring 25% of Ballard, pouring $450 million into fuel-cell research and vowing to be producing 100,000 fuel-cell vehicles by 2005. Ford’s entry pushes the investment close to $1 billion.

All of the world’s major auto makers are researching a wide variety of alternative-fuel vehicles, including fuel cells, in an effort to reduce vehicle emissions.

Pressure to reduce tailpipe pollution is growing worldwide, as evidenced by last week’s global warming agreement reached in Kyoto, Japan, requiring major industrialized nations to reduce greenhouse gas emissions.

California also is requiring auto makers to produce electric vehicles in large numbers by 2003, and last week proposed tightening emissions on light trucks.

“This is an extremely promising technology,” said Gary Heffernan, Ford’s manager of corporate technology planning. “The real question is when it will be ready for the market.”

Juergen Schrempp, chief executive of Daimler, said Ford’s involvement demonstrates that the fuel cell is a “serious and promising alternative to the conventional combustion engine.”

The partners said their alliance is one of technology-sharing, not a development joint venture. Ford and Daimler will share their expertise but separately design and produce fuel-cell vehicles.

Ford has been working on a fuel-cell vehicle that stores hydrogen on board, whereas Daimler is focusing on one that uses methanol to produce hydrogen on board, resulting in some emissions. The Ford approach is cleaner but is considered a longer-term project because it must overcome questions about storage and supply of hydrogen. Ford officials, however, said the company could initially come to market with a methanol- or other fuel-based system.

Ballard, based in Vancouver, B.C., will provide fuel cells to its auto partners. Daimler will specialize in developing fuel-cell engines, which integrate the fuel cells with the air supply, control subsystem and fuel processor to generate hydrogen from gasoline or methanol.

Ford will provide expertise for the electric drive system, which converts electricity supplied by the fuel cell to power for the vehicle. The system includes computer controls, electric motor and transaxle.

Dearborn-based Ford will pay about $210 million to acquire 3.7 million Ballard shares. It also is acquiring 394,000 shares from Daimler. Ford will own 15% of Ballard and Daimler is left with 20%.

Ford will also invest about $70 million in Daimler’s fuel-cell engine venture. It will own 23% of the company; Ballard controls 26%.

Ford will invest about $140 million in cash, technology and other assets in a new entity to develop and commercialize electric drive trains for electric vehicles, including fuel cells.

Daimler and Ballard will each invest $34 million in the Ford unit, owning 19% each.