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Alternative products; At doorstep to a $2 billion market, APD Cryogenics is virtually alone Freon has been eating the atmosphere, and someone has to pick up the check. The question is: how much will it be? When the federal government ruled that the ozone-crunching gas could no longer be used in auto air conditioners, few Americans realized how much it would ice their pocketbooks. For those who are driving older cars that are no longer under warranty, the price to recharge their air-conditioning systems will range from $100 to $1,000. Engineers at APD Cryogenics Inc. in Allentown, who normally design superconductive magnets for missiles and computer chips, have discovered a formula that could save money for millions of car owners and heat up APD's business. They now offer the $100 alternative. "It wasn't like the cat spilled a vial in the lab and they came up with Teflon," said Gary Hordeski, vice president and general manager of APD Cryogenics. "It wasn't a mistake." "We'd developed this know-how and expertise in our own little cryogenic world since 1959. We had a a 25-year jump of DuPont and Allied and every one else." Thanks to APD Cryogenics, people owning pre-1993 cars will have an option for replacing the Freon in their air conditioners without getting them rebuilt. "It is a major milestone and caps a long period of time in which we fought to establish credibility," said Carl H. Rosner, president of Intermagnetics General Corp. of Latham, N.Y., APD Cryogenic's parent company. "There has been a high level of disbelief that we have done something that DuPont or Allied couldn't do. Now we are proving it." Experts said APD Cryogenics and Intermagnetics currently have virtually no other competition. "It is quite natural for people to believe that DuPont has spent millions doing the same thing," said industry analyst Theodore Rudd O'Neill of H.C. Wainright & Co. of Boston. "These people have been wrong." Mixing up a cheap, environmentally safe Freon replacement came naturally for the former research and development facility, which was part of Trexlertown-based Air Products and Chemicals Inc. until it was spun off in 1987. DuPont, inventor of Freon, supplied Detroit automakers with enough of the old coolant to satisfy warranty needs. After that, it developed a replacement substance, R-134a, that required a different air conditioning system for new cars and major surgery to cars built before 1993. But only APD Cryogenic and its parent, Intermagnetics General, were able to patent and gain Environmental Protection Agency approval for a substance that could replace Freon with out a major operation to older cars. The $2 billion market for the coolant FRIGC (pronounced: "Fri-Jik") over the next 10 years will grow to be 100 times larger than current sales for APD Cryogenics. It also dwarfs Intermagnetics' annual sales of $85 million. Intermagnetics reported a 86.5 percent rise in profits to $4 million for the fiscal year ended May 28. And that was before FRIGC. APD Cryogenics currently employs 120 people, and Intermagnetics employs 500. But much of the employment growth will come in the companies subcontracted to make and market the product. "Over time, the product could swamp this company," said analyst O'Neill. Intermagnetics reached an agreement last May with Schenectady International Inc. for production of the refrigerant. Last July, FRIGC was accepted by the EPA as a substitute for the environmentally unsafe Freon. Intermagnetics said it had formed a new subsidiary, InterCool Energy Corp. called ICE for short, which would be dedicated to expanding business opportunities for FRIGC. It will be based in Latham, N.Y., and have operations in Allentown. Then Intermagnetics established a relationship with a national distributor of after-market auto products. Intermagnetics signed a long-term agreement with Pennzoil Products Co. of Houston, Tex., in which Pennzoil became the North American distributor for FRIGC refrigerant. "The company has sizzle and steak, but people are most interested in the sizzle," said Sheldon Grodsky, director of research at Grodsky Associates of New York. "While they have actual products such as strong magnets and superconducting wire, more are interested in that pie-in-the-sky product." No more, said Hordeski. FRIGC, officially an ICE product, will soon be distributed by Pennzoil. "Our objective is to have that company begin to take that product to the individual car market. Freon, which has been produced since the 1930s, will soon only be available on the black market. It is then that many car owners will learn some lessons about the cost of maintain a clean environment. Scientists world-wide have linked chlorofluorocarbons (CFCs) to the deterioration of the Earth's ozone layer. Under the Montreal Protocol of 1992, the United States and 110 other countries will cease production of CFCs. Production of Freon, which uses CFCs as a primary ingredient, will be banned at the end of 1995. That leaves an estimated 115 million cars and light trucks on the American roads still using the Freon system, according to Motor Trend magazine. Dan Hausrath, a veteran technician at Schweikert's, said he wasn't overly surprised three years ago, when a group of engineers from nearby APD Cryogenics arrived at the Allentown garage and asked him to test the home-grown air-conditioning coolant in a company car, a late-1980s Ford Taurus. The market will need such a product, Hausrath said. "We recharged their car like any other air-conditioning refrigerant," Hausrath said recently. "We're specialists in air conditioning, so we used our equipment, and they did tests. "I used the same basic tools as when I recharge with R-12 Freon,and the bill for a customer using FRIGC would be about $100. "That compared to the only other alternative replace with the R-134a system used in new cars for about $1,000." Gary Schweikert, owner of Schweikert's, said his only interest in APD Cryogenics is that it comes to him for car work. He believes that given the proper marketing and advertising, FRIGC should "make a killing." Sales will boom for 15 to 20 years," Schweikert said. "There are a lot of 10 to 20-year-old cars out there." Schweikert said he sometimes regrets that he hasn't bought any Intermagnetics stock, which despite the short sellers has more than tripled its value since April 1993, when it sold at $6.06 per share. Analyst O'Neill said there's plenty of room on the bandwagon. "Investors are welcome to stick around while the stock goes to $40," he said. | ||||||||||||||
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