The new fuel thing
Is the future now for the 'car of the future'? Not quite, but it may come sooner than you think - and from GM, says Fortune's Alex Taylor.
By Alex Taylor III, Fortune senior editor

(Fortune Magazine) -- Stop. Reboot. Roll! In the future, that might be the most common advice from your friendly neighborhood gas jockey. Except he would be pumping hydrogen, not gas. And while your future car would look much the same as what's parked in your driveway right now, it will drive without disgorging many of today's problems--smog, pollution, dependence on nasty foreigners.

The secret is under the hood, where there is no engine in sight, no carburetor, no cylinder block, no oil pump--just a black box housing thin membranes and an electric motor. And guess what? The future is almost ready to hit the road.

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The engine has no moving parts but the Sequel gets to 60 in ten seconds.

That, at least, is the pitch from GM, one the company backed up by inviting a group of journalists to Southern California to drive the Chevy Sequel, GM's test version of a fuel-cell-powered vehicle. The Sequel, GM (Charts) immodestly proposes, is the greatest leap forward since Karl Benz rolled out his gasoline-powered three-wheel bicycle in 1886. "GM has reinvented the automobile," brags Larry Burns, vice president of R&D.

Exciting stuff--until the rubber meets the road. On a test drive, the red check engine light flashes on. Nine times on a 20-mile circuit the Sequel stalls. The future of the automobile has to be abandoned on the side of the road.

Is this yet another example of GM driving toward failure?

No, not this time. Despite the electronic gremlins, which are easily fixed, the Sequel is a genuinely bold and innovative engineering achievement. DaimlerChrysler (Charts) and Toyota (Charts) have put a few fuel-cell buses in service, and Honda (Charts) has leased one fuel-cell-powered car, but GM has gone farther than any of its rivals to develop a car that burns no gas, produces no harmful emissions--and that normal people wouldn't mind driving.

It has already invested $1 billion in the program and might spend another billion before it gets a fuel-cell car into mass production. After losing $10.6 billion in 2005, it is a wonder that the company can afford it. But GM vice chairman Bob Lutz is so enthusiastic that he is willing to delay conventional new models to get a fuel-cell car into production. "It's a game changer," Lutz says.

The next step is for GM to install its fuel-cell powertrain into the familiar Chevy Equinox crossover vehicle. Laden with the fuel stack, electric motor, and high-pressure hydrogen fuel tanks--a little bigger than the ones scuba divers wear--these vehicles will weigh 500 pounds more than a standard Equinox. Otherwise, they will look and feel almost exactly the same.

Next year, GM will lease 110 fuel-cell-equipped Equinoxes to individuals. The Sequel is in the testing stage. Still, it is the most emphatic statement yet from GM that it sees developing alternatives to gasoline engines as a prerequisite for staying in business.

That's because change is in the air--literally. In 2004, California adopted regulations that limit greenhouse-gas emissions from automobiles; several Northeastern states have followed suit. And with Western Europe committed through the Kyoto Protocol to reducing its greenhouse-gas emissions--of which carbon monoxide spewed from tailpipes is the most common--the economic climate is changing in a way that could accelerate the transition from the internal combustion engine.

Honda and BMW are both experimenting with liquid hydrogen as a fuel for conventional engines; BMW announced it is putting 100 hydrogen-fueled cars on the road next year. GM's is a fundamentally different bet, leapfrogging past traditional engines altogether.

Combining hydrogen and oxygen to cause a chemical reaction that makes electricity has been known since the 1830s and has been in practical use since the 1960s; man could never have reached the moon without it. The difficulty has been bringing the technology down to earth.

Then there is the infrastructure question: how to produce and distribute hydrogen nationwide. Hydrogen refilling stations are scarce--fewer than three dozen nationwide in only a handful of areas. The pumps look like conventional gas ones except that they are more high-tech (and much more expensive) because the hydrogen gas is kept under pressure.

GM hopes that if it launches a small car fleet in a few big markets (New York, Washington, Los Angeles), oil companies might become interested in adding hydrogen refueling stations to their retail outlets. It also hopes to pique consumer curiosity--hence the decision to brand the Sequel as a Chevrolet, GM's best known and most global brand.

Says Byron McCormick, the engineer who heads GM's fuel-cell effort: "We're building an industry. You can't do it staying in the laboratory. We have to get out there and make an emotional connection to people who are really going to buy this thing."

Back at the lab, developments are moving quickly. Because smaller is cheaper, GM is now working on a layout that is half the size and weight of the current one and only a little bigger than a conventional four-cylinder engine. That version could be inside a car before 2010.

No question: Creating the car of the future is tricky territory for GM, and it has gotten it wrong before. (Remember the EV1, the battery-powered car with a range of a measly 70 miles?) It doesn't want to get too far ahead of the market or the infrastructure, leaving itself stuck with futuristic inventory.

As for the car itself, Burns says the biggest remaining problem is how to store more hydrogen gas. The Sequel can carry about 18 pounds of hydrogen, equivalent in power to 16 gallons of gas. That gives it a range of about 300 miles--on the low end compared with conventional cars. A hydrogen fill-up costs about $40, making it about 16% cheaper than $3 a gallon gas.

GM does not see the Sequel (and its sequels) as a distant dream. Burns, who can best be described as a fuel-cell evangelist, has set a deadline of 2010 by which to develop a fuel-cell unit that is competitive in price and suitable for the mass market. By 2020, he estimates, 10% of the world's 90 million new cars and trucks will be powered by fuel cells.

Test drive postscript: Having to reboot the Sequel the way you would Microsoft Windows--turn it off, wait impatiently for about 30 seconds, then turn it back on--is annoying. But when the cars get going, their performance is impressive. They accelerate smoothly, run quietly, and brake without complaint.

GM has outfitted the Sequel with electronic controls for the brake, accelerator, and steering to make driving similar to what people are used to. As GM may have learned from the hybrid, the way to nudge consumers toward adopting technology that is chic and green is to make it as invisible as possible.

Ford's 'Way Forward' cars.

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