April 21st  2002

Fueling New Generation of Cars

Source:CNN( BUSINESS UNUSUAL)

Hello and welcome to BUSINESS UNUSUAL. I'm Willow Bay.

Continued political tension in the Middle East is generating fresh economy fears in the U.S.
over the cost of oil. Gasoline prices have risen more than 14 cents a gallon in the month of
April, according to the American Automobile Association. A gallon of regular gasoline on
average is going for about $ 1.41.

These pricing fears are fueling talk of an energy crisis, and are prompting a new look at
alternative energy sources for cars. One option, fuel cell technology. It uses a chemical
reaction to create electricity from hydrogen. Vancouver-based Ballard Power Systems has
become the fuel cell manufacturer of choice for forward-thinking American auto makers. But
will the idea catch on?

Ali Velshi has the story.

(BEGIN VIDEOTAPE)

ALI VELSHI, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): Cartoonists working on
the 1960s show "The Jetsons" had some pretty specific ideas of what cars of the future
would look like. So did Oldsmobile with its rocket engine car.

But for today's auto designers, the car of the future is shaping up to look like any other car.
It's the inside that will be different, along with the fuel it uses -- even the way it sounds.

These cars are powered by fuel cells, rather than the century-old internal combustion
engine. Fuel cells convert hydrogen to produce electricity without combustion and without
any emissions other than water.

BRIAN GILLESPY, TEST ENGINEER, FORD MOTOR SYSTEMS: Your clothes dryer or a dryer
vent. That's about exactly the feel of it. When you put your wet clothes in the dryer and you
turn it on, and you feel that vent air coming out of it -- it's warm like that and it's wet like that.

VELSHI: Fuel cells were developed by NASA in the 1960s for U.S. spacecraft. They are likely
to be the technology of choice for the new non-polluting car, according to Firoz Rasul, the
CEO of Ballard Power Systems. Ballard is the largest manufacturer of fuel cell engines.

FIROZ RASUL, CHAIRMAN, CEO, BALLARD POWER SYSTEMS: I think it will start to be a car
that consumers will demand and auto companies will start to offer. Initially, I think it would be as early as 2007, and I think after 2010 more and more cars will be powered by fuel cell
engines. Some other companies claim that by 2020, 25 percent of all vehicles will be fuel cell
powered.

VELSHI: Ballard has been making fuel cell engines for the last 20 years, and it's overcome
some major hurdles, like reducing the size of the engines and making them less expensive.
But the U.S. Department of Energy's recent vow to subsidize fuel cell technology may be the
key to making fuel cell engines a viable option. Merrill Lynch analyst Christine Farkas follows
the alternative energy sector.

CHRISTINE FARKAS, MERRILL LYNCH: It is a triumph. It is a beginning, if you will -- we think
the government support will only continue to grow for both alternative fuel and the hybrid and
the fuel cell vehicles, and also for hydrogen fuel.

The industry is taking it certainly very well. They are pleased to see the commitment at such a
high level in the U.S. and elsewhere around the world, but again, we have to see the dollars
put to use, and appropriate programs and demonstrations come out of them.

RASUL: The U.S. has announced that it wants to reduce its dependence on foreign oil, so
energy security is a new motivation for looking at other types of technologies. The tax
incentive that Congress just approved off $ 11,000 a vehicle, as well as other initiatives that
the U.S. Department of Energy is coming out with is a total of about $ 6 billion of initiatives that are being targeted at fuel cell vehicles. And that is what is changing today, that the world is beginning to recognize not only that this technology is there, but also it will help solve a
particular problem, such as the environment, such as energy security, and such as a higher
performance vehicle.
 

VELSHI: Car companies started their own fuel cell research about 11 years ago, and recently
major oil companies, like BP and Shell, have joined the game.

RASUL: A number of the oil companies have created subsidiary companies that are working
on new technologies to create hydrogen, to store hydrogen, to dispense hydrogen. And that
I think is a very positive move, because the oil companies have realized that they are really in
the energy business, not just the oil business.

VELSHI (on camera): It sounds like pie in the sky. The major oil companies, car manufacturers
and the U.S. government all on board. The trick is getting consumers to change the way they
think about cars and the way they fuel them.

GILLESPY: This right here is our receptacle for our fueling nozzle.

VELSHI (voice-over): Brian Gillespy is a test engineer for Ford Motor's fuel cell division.

GILLESPY: Infrastructure is a big obstacle we need to overcome. We are going to need to get
them to work with the car just a little bit differently than they do now. The refueling process
they have to go through is going to be a little different than what they are used to, but once
they get used to it, they are going to like it better than what they have now.

VELSHI: The only fuel cell car shown at this year's New York Auto Show was the Ford
Focus, powered by a Ballard engine. Together, Ford and DaimlerChrysler own over 40
percent of Ballard's common shares, and have long-term strategic agreements with the
company.

Others car manufacturers, like GM and Toyota, are working to develop their own fuel cell
engines. Amongst auto manufacturers, the race is on to get the first cost-effective fuel cell
powered vehicles on the road.

Farkas says the competition is healthy.

FARKAS: This is a revolution, if you think about it, in terms of the automotive world. GM or
Ford alone cannot change the market. It's very important that these major companies
cooperate to a certain extent in bringing the technology to market, and that goes with cars
and also with fuel.

VELSHI: Firoz Rasul, on the other hand, has set his sights on being first.

RASUL: We will be the first. There may be other companies that may be equally first, but
certainly we're not going to be second.

VELSHI: For BUSINESS UNUSUAL, I'm Ali Velshi, CNN Financial News.

(END VIDEOTAPE)

BAY: So are cars powered by fuel cells as safe as cars powered by gasoline? According to
Ballard Power, yes. Hydrogen is volatile, but because it dissipates so quickly it's not likely to
ignite in an accident, the way gasoline might.

If you'd like to learn more about hydrogen fuel cells, check out the Department of Energy Web
site.