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Technology Stocks : Ballard Power -world leader zero-emission PEM fuel cells -- Ignore unavailable to you. Want to Upgrade?

To: Hawkeye who wrote (4601)	12/6/1999 11:56:00 AM
From: Hawkeye	Respond to of 5827

BTIM posted this on Motley Fool. Source: The Economist, 04th December, 1999 HONDA: STACK OF TROUBLE ON DECEMBER 7th Honda is due to test its new Formula One racing car, which it will enter for next year's competition, in an attempt to regain the fame it enjoyed in the late 1980s and early 1990s, when Honda won six constructors' championships. But money is tight; this time Honda will be in partnership with British American Racing group. And rather than providing the whole car, the Japanese firm will supply only the engine. The reason lies on a bench at Honda's test track in Tochigi prefecture, north of Tokyo. It looks like a chunky stereo amplifier, except that it is made of plastic composite and has ribbed fin surfaces. This is Honda's version of a fuel-cell stack, the soul of the machine that within 20 years may replace the internal-combustion engine with hydrogen-powered electric motors. But this revolutionary stack looks bigger and bulkier than those made by Ballard Power Systems, a Canadian company now working with DaimlerChrysler and Ford to develop fuel-cell engines. Another partnership between General Motors (GM) and Toyota is also working on fuel-cell cars ready to go to market in four years. Honda has had to curtail its re-entry into Formula One - the ultimate tribute to the internal-combustion engine - because it needs to save money for investment in the machine that threatens to kill off that technology. Honda has installed a Ballard fuel cell in one of its prototype electric cars. But Ballard's contract does not allow the Japanese firm to take apart the cell to learn its internal secrets. Honda's boss, Hiroyuki Yoshino, is hoping that Honda's famously talented and creative engineers can close the gap with the Ballard cell and develop an entire fuel-cell engine themselves. That will be costly. Honda is an oddity in the motor industry: a small car company that makes a couple of mass-market cars. Its production of only 2.3m cars a year compares with, say, Volkswagen's 4m or GM's 7.7m. It has built a profitable international business through engineering excellence and flexibility in manufacturing. Its overseas factories, for instance, are built in small units and expand as their products find favour in local markets. Some of those factories can make eight different models on one assembly line - a trick that BMW also uses, which helps to explain the high margins both enjoy. As an engine producer, Honda looms larger than it does as a car maker. Including motor cycles, marine outboard engines, hedge trimmers and assorted power tools, it produces around 10m engines a year. The firm is rolling out ever more sophisticated petrol engines and is even developing diesel technology, which it has shunned for years. It has found a way of cutting fuel consumption by designing valves that can optimise their operation to match different engine speeds. Now the firm is making direct-injection petrol and diesel engines that will meet emissions standards which will be imposed in Europe in 2005. Its new engines are so clean that they just about satisfy the zero-emissions rule that California plans to impose from 2002. This week, in America, Honda is launching a hybrid petrol-electric car. It has tied a battery and an electric motor to a small, one-litre engine. That gives the performance of a 1.5-litre engine, but with consumption of only about 3 litres per 100 kilometres, half as much as a conventional engine. This is the first hybrid car to be launched - ahead even of the hyped Toyota Prius. However, although Honda is ideally placed to supply the petrol engines that everybody reckons the market will want in the next 20 years, that will not guarantee the company's future. The problem is that developing a decent fuel-cell engine is proving so expensive. The huge cost of developing alternative power systems is one of the forces pushing the motor industry to consolidate. Before the merger of Daimler Benz and Chrysler, Robert Eaton, Chrysler's boss, knew that America's third-largest producer would struggle to match the environmental and technical demands ahead. In the same way, Honda may not be able to stay independent, despite its profitability. This week the possibility of a deal to supply General Motors with direct-injection petrol engines sparked rumours of a grand alliance between the two firms. In Tokyo, Honda denies that anything of the sort is going on. Every now and then Honda's name is also linked with Fiat. The Italians' strength in Europe would fit with Honda's presence in North America, where its models are best-sellers and where it makes about four-fifths of its sales and profits. Honda's Civic and Accord, the mass-market cars on which it depends for half its sales, could do with a bit of Italian flair. The Italians could benefit from Honda's engine technology. Without some such alliance, Honda might disappear - along with the smart little petrol engines on which its fortune is founded.