GM, Daimler to develop hybrid

Joint venture reverses dismissal of technology

December 14, 2004|By Rick Popely | Rick Popely,CHICAGO TRIBUNE

General Motors Corp. and DaimlerChrysler AG announced yesterday that they will jointly develop hybrid technology to sell starting in 2007, reversing their earlier dismissals of fuel-saving hybrid vehicles as too expensive and not in demand.

The announcement joins the world's largest and fifth-largest automakers in a mega-dollar effort to try to catch Toyota, the industry leader in the sale of hybrids. Honda put its third hybrid model on sale last week, the Accord Hybrid sedan. Honda also sells a hybrid Civic sedan and the two-seat Insight. Ford Motor Co. began selling a hybrid Escape SUV in August.

Toyota expects to sell about 54,000 Prius hybrids in the United States this year and 100,000 next year. By contrast, GM and the Chrysler Group, DaimlerChrysler's U.S. unit, plan to sell only a few thousand hybrid trucks in 2005 with less-advanced technology.

Neither company would say that they misread the market for hybrids, which save fuel by using a battery-powered electric motor to supplement a gasoline engine. Both insisted they were teaming up to lower the cost of developing the technology, which they declined to discuss.

Tom Stephens, a GM vice president, would say only that GM is investing "hundreds of millions of dollars." Analysts believe that could run higher given that hybrids typically add $4,000 or more to the cost of a conventional gasoline vehicle.

Toyota said the announcement affirms that Americans want more hybrids. Its Prius has waiting lists of three months or longer in the United States.

"It validates what we've been saying all along, that there is a business case for hybrids and that there is tremendous demand," Toyota spokesman John Hanson said. "There is no denying that hybrid technology has arrived in the mainstream. The technology is there, and the market is there. If you're a mainstream manufacturer, you have to be in it."

Promising an advance in hybrid technology, the companies described it as a "two-mode system" that boosts acceleration and yields about 25 percent higher fuel economy in city and highway driving. Hybrids such as the Prius are more efficient mainly in the city, where an electric motor reduces reliance on the gas engine to save fuel.

The GM-DaimlerChrysler system will work on passenger cars as well as large pickups and sport utility vehicles that tow and haul heavy loads.

Components such as batteries and electric motors will be smaller and lighter than current hardware, and the system will work on front-wheel- and rear-wheel-drive vehicles and with gasoline and diesel engines from 4-cylinders to V-8s.

While the two companies will share some components, both will tailor the system to their vehicles for different performance and feel.

Neither would project production volume for the system, which will appear first on the 2008 Chevrolet Tahoe and GMC Yukon, due in fall 2007. Those are V-8-powered, full-size sport utility vehicles that were in line for hybrid technology and whose sales have slowed in the recent run-up in gasoline prices.

DaimlerChrysler said it will offer the technology soon after GM on its Dodge Durango SUV. The German-American company also plans to use it on its Mercedes-Benz luxury cars.

Both said they would offer the system to other auto manufacturers, the same as Toyota does with its technology. Nissan, for example, will buy Toyota components for a hybrid Altima sedan.

"We believe it is the most efficient full hybrid design for any vehicle configuration," GM's Stephens said.

Thad Malesh, an analyst with Automotive Technology Research Group in Thousand Oaks, Calif., thinks GM and DaimlerChrysler underestimated U.S. demand for hybrids, which he sees growing from 87,000 vehicles this year to 1 million by 2010, or about 6 percent of the market.

"We've entered a period in which we have high oil prices on average that are periodically interrupted by lower prices," Malesh said. "If one company - Toyota - offers a breakthrough technology that addresses that, it's something the others can't ignore for very long."

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