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

To: Mike Klobouk who wrote (3600)	1/1/1999 5:40:00 PM
From: Sid Turtlman	Read Replies (3) \| Respond to of 5827

Mike: I've never contended that the methanol infrastructure thing is unsolvable. It is easily solvable - all someone has to do is spend billions of dollars, and there will be methanol pumps ready and waiting for any fc cars that happen by. The issue is: who is going to spend it? DCX + F could, but why should they? Selling fc cars may provide a minuscule increase in their sales, but it would be hardly noticeable - remember, the existence of fc cars is not going to increase the total size of the car market, and these two outfits already have a hefty chunk of it now, and probably a bigger chunk in 2004 after F makes a few acquisitions and the marginal Asian producers diminish. Second, the fc cars are going to have to be heavily subsidized as is, due to their extremely high cost (estimated at 3 times the price of a conventional car in 2004, by the head of Toyota R&D quoted in the latest H&FC Letter.) So, if I am F or DCX, do I want to spend billions to set up an infrastructure to encourage customers to shift from my profitable product line to one that will be extremely unprofitable for years? No, I don't think so. The service station owners? Yes, AFTER there are plenty of fc cars on the road, they probably would want to add methanol, but not before. Ballard? Yes - the one and only outfit with a strong incentive to spend the billions. But where will that money come from? The cash it has now will be long gone by 2004, as it must fork over money to pay its share of the R&D. Even if the company has wild success in buses and stationary power (extremely unlikely, but let's pretend) neither of those businesses would generate much extra cash by then. So the billions would have to be financed, and, fingers crossed, the stock market maybe will still be exuberant then. The number of shares outstanding, already huge, would soar even higher, making an EPS of more than pennies per share a remote possibility for years to come, even if the gamble works and, with methanol all over the place, some people buy fc cars. I don't think the above scenario will really happen, because I don't think fc cars will be introduced before 2010 at the earliest, but I think it is plausible if I am wrong on the latter point. Your nonchalant dismissal of the methanol infrastructure problem on the grounds that gas pumps and tanks get upgraded and replaced all the time, ignores the fact that there is an immediate market for the contents of the new gasoline tank. Until there are large numbers of fc cars on the road, that won't be the case with a new methanol tank. That is why this is a classic chicken and egg problem, and they always take big bucks to resolve.