GM Sees Stationary Fuel-Cells First Then Cars

FREJUS, France December 4, 2002; Alan Katz writing for Bloomberg reported that General Motors Corp. is staking out a future for fuel cells that will be at least as dependent on sales to factory managers as drivers.

The No. 1 carmaker began test drives for journalists of its prototype Hy-Wire fuel-cell car yesterday in France, the same day that Toyota Motor Corp. and Honda Motor Co. delivered the first low-pollution hydrogen fuel-cell cars in the U.S.

It's power for buildings that will help to pay for the Hy-Wire's development. Stationary fuel cells providing power to hospitals and factories "is the right market to go to next," Larry Burns, General Motors's vice president for research and development, said in an interview. "I think you will see that starting to play out in a significant way in 2005."

Automakers are racing to offer fuel-cell technology, used for decades in spacecraft, in anticipation of tighter anti-pollution rules. Fuel cells combine hydrogen with oxygen and generate electricity to power a motor and emit water vapor as a byproduct. Burns doesn't see fuel-cell cars making much headway until 2010.

Tim Vail, who heads General Motors's stationary fuel-cell project said the power business in the U.S. is worth about $400 billion, making it roughly equal to the $450 billion market for car powertrains.

By 2005, "we believe that we will be at sub-$1,000 a kilowatt of installed power, which will be competitive with diesel generators" Vail said in a telephone interview. The company's fuel-cell generators cost about $5,000 a kilowatt now.

General Motors expects to announce early next year its first distribution deals with power companies. It also is currently in talks on pacts with Caterpillar Inc., Cummins Inc. and Air Liquide SA of France among others, Vail said. General Motors will provide 60 kilowatt generators, each big enough to power about 10 houses, to some of these companies beginning next year.

Vail said that if the agreements to sell the first several generators, to be built in the company's Honeoye Falls, New York, research center, "work out on the marketing side, then we will make a significant investment in a factory to produce 10,000 of them a year for 2005."

That decision will be made in 2004, Vail said.

General Motors made two vehicles available for test drives, the Hy-Wire, which has hand-grip driving controls, and the HydroGen3 prototype car, an Opel Zafira minivan powered by a fuel-cell engine.

If either is ever to make it into mass production, General Motors will have to cut the cost of their fuel-cell engines by a factor of 10 from the $37,000 they would cost now.

"There have been huge cost reduction ideas" that General Motors has yet to integrate into its fuel-cell production, Burns said. Cost reductions between now and 2010 will come in spurts as each new generation of fuel-cell systems is produced, he said.

The automaker has not committed to producing fuel-cell cars in quantity.

"I'm personally convinced that this technology holds the promise of being cost competitive," Burns said. A decision on mass production would only come once the company was sure that the cars could hit price targets.

"Given the amount that will be invested by 2010, you're going have to be finding ways to make a return by then or you will be digging yourself too deep a hole," he said.

Burns said General Motors was spending "hundreds of millions of dollars," but less than $300 million, on its fuel-cell research yearly. Vail said the figure was "much closer to $200 million" than to $300 million. That total includes research for automotive and stationary fuel-cell power.

Investors have also yet to think much about General Motors's or any of its rivals' fuel-cell efforts.

"We have no interest in fuel cells at the moment," said Werner Lykowsky, who helps manage 5.5 billion euros at Helaba Invest in Frankfurt. Helaba holds DaimlerChrysler AG and Bayerische Motoren Werke AG stock but does not own General Motors shares.