VANCOUVER -- Ballard Power Systems Inc. is poised to give up its long-held dream of revolutionizing how the world fuels its cars.
The Vancouver-based company, which has for years poured millions of dollars into developing fuel-cell technology that would replace the internal combustion engine, now says it is in talks with two major auto makers for that part of its business.
Ballard said in a short statement it was negotiating with Daimler AG and Ford Motor Co., citing the "lengthy projected timeline to commercialization and high cost of development."
Ballard would not comment further but an analyst who has followed the company for almost a decade said a potential sale of its automotive fuel-cell business suggests it is giving up on its hopes of getting the technology to market and transforming the global market any time soon.
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"If you had any hope that this was going to come to pass, you would hold on to it," said Research Capital analyst Jon Hykawy, adding the automotive fuel-cell sector has been a "black hole" for cash."
Ballard was an early player in Canada's fuel-cell sector.
The company has become inextricably linked to the prospect of a fuel-cell-powered cars that would be nearly noiseless and leave nothing but water vapour in their wake.
Major auto companies have invested more than $1-billion in Ballard projects and the company received millions of dollars in federal research grants.
Ballard shares, which have traded under the $10 mark for most of this year, closed as high as $192 in 2000 when it was hoped that fuel-cell-powered cars would be on the market in a couple of years. But aside from a small number of vehicles used in demonstration fleets, such cars have not materialized.
Ballard was one of the first companies to champion fuel cells, which generate electricity by combining hydrogen fuel and oxygen, as a practical source of energy. The only byproducts are water and heat. But efforts to turn prototypes into affordable products proved costly and time consuming, disappointing starry-eyed investors and forcing the company to look for shorter routes to market.
Ballard's automotive sector has been "the long-term payback," Mr. Hykawy said.
"This was the reason you were in it, this was how you were going to scale the fuel cells and end up with costs that are competitive with internal combustion engines and take over the world," Mr. Hykawy said.
"Now, it's 'well, we might just sell it.' "
Shareholders appeared to welcome a possible transaction, driving up the company's shares by 10.5 per cent yesterday.
Ford already owns about 11 per cent of Ballard, and Daimler about 19 per cent. Both auto makers have participated in joint ventures with the company.
John Tak, chief executive officer of Hydrogen & Fuel Cells Canada, the national industry association, said a potential transaction can be seen as a validation of Ballard's technology.
To some degree, the public's focus on the automotive sector and Ballard has overshadowed the accomplishments of other fuel-ell companies that are making commercial breakthroughs, Mr. Tak said.
He also supported the government funding that has gone to Ballard, saying the fuel-cell sector has been underfunded compared with other areas such as biotechnology.
"Daimler would not spend the money unless it was a good option for them," Mr. Tak said, emphasizing that no deal has been reached.
Ballard said there was no guarantee talks would end in a definitive deal.
But if a deal is successful, it mark a serious shift for Ballard, which has been chasing the dream of fuel-cell vehicles almost since it was founded in 1979.
Ballard's focus has been changing since CEO John Sheridan took over about two years ago.
Currently, Ballard is developing fuel-cell products for applications including forklifts, backup power and residential systems that provide heat and hot water.
Last month, Wal-Mart Stores, Inc. followed up on a 2006 trial project with an order for fuel-cell units for forklift trucks from Cellex Power Products Inc., a Vancouver company acquired earlier this year by Plug Power Inc.
Ballard has also developed systems for fuel-cell-powered buses, which have been employed in demonstration projects in several countries.
In addition, it has an agreement to supply technology for a fleet of about 20 buses in British Columbia that are scheduled to be in service before the 2010 Olympic games.
BALLARD POWER (BLD)
Close: $5.14, up 49¢
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