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Suppliers position themselves for future fuel cell profits

For 97 years, Dana Corp. has thrived by building drivetrain

and chassis parts for the auto industry.

At first glance, the auto industry’s drive toward cleaner powertrains such as fuel cells could mean less business for Dana.

Not so, says the Toledo, Ohio, supplier. Dana is positioning itself to be a one-stop shop for polymer electrolyte membranes and solid oxide fuel cell components.

Dana is identifying its existing equipment, processes and materials that can be modified to manufacture fuel cell parts. The parts could be produced either on new or existing equipment. If the fuel cell product failed, the new tooling or equipment could be used to make products for internal combustion engines. Traditional auto suppliers are still part of the picture as automakers develop parts and technology for fuel cell systems. Dana is one of several that are banking on fuel cells to flourish, investing time, money and people in their pursuit of the new technology. Others include Delphi Automotive Systems Corp. and Eaton Corp. The key is to help automakers make fuel cell vehicles affordable, and easy to manufacture.

“In the amount the automakers have invested in alternative energy, it’s an important insurance policy against dramatic change in the way cars are propelled,” says Kenneth Blaschke, an analyst with Deutsche Bank Alex Brown Inc. in San Francisco. “If you feel as if some portion of your business will be cannibalized if fuel cells are successful, you usually will be motivated.”

Dana’s fuel cell focus, which intensified in the last three years, is part of its Transformation 2005 plan. The plan steers the supplier toward growth in emerging technologies and the creation of a new product portfolio.

“It’s critically important,” says Joe Magliochetti, Dana’s chairman. “If fuel cells become a viable alternative to the internal combustion engine, or a supplement, we’re prepared to put the support behind it and ensure its success.”

Some fuel cell components that Dana’s existing equipment could support include composite components such as bipolar plates and sealing material from its Plumley division in Paris, Tenn.; metal bipolar plates from its Victor Reinz division in Neu-Ulm, Germany; fluid routing devices from its Fluid Systems Group in Rochester Hills, Mich.; heat exchangers from its Thermal Products Division in Oakville, Ontario; and filters from its Wix Filtration in Gastonia, N.C.

Baby steps

Dana’s first steps toward becoming a supplier of fuel cell components will be in the residential and industrial markets, not the automotive industry.

“We’re going to try to use our manufacturing base and technology for the residential and stationary markets such that when the (automotive) industry finally needs capability, we’ll be sitting there with it,” says Jack Dawson, the supplier’s director of fuel cell development in Rochester Hills, Mich.

Fuel cells likely will make their initial footprint in the industrial stationary market, which Dawson says could take off as early as 2004. Fuel cells, for example, could be used as backup electrical systems for businesses, and residential applications also are possible.

General Motors is working with suppliers as it develops its stationary fuel cells. “It’s a grand opportunity for them to learn,” says Byron McCormick, GM’s co-director of fuel cell research. “As they get involved in this, they may realize the volumes might be different, the lot sizes might be different.”

The auto industry is not expected to put fuel cells in a high-volume vehicle until at least 2008, at which point Dawson says they may represent less than 1 percent of global annual vehicle production.

In addition to volume, lowering fuel cell costs and downsizing the fuel cell is essential for the technology to become mainstream.

Dana, together with energy supplier Southern Co. of Atlanta, Texaco Energy Systems Inc.

and Walt Disney Imagineering Research and Development Inc., has hired the Houston Ad-

vanced Research Center in

The Woodlands, Texas, to conduct stationary fuel cell research on its behalf. Dana would not disclose its investment in this research, but a spokesman from the Research Center estimates the amount to be less than $1 million.

Dana’s fuel cell component sales have been limited to prototype work. Dana is supplying prototype fuel cell components for one automaker and is working with others. The supplier has no contracts for stationary fuel components.

But investing in fuel cell technology is a risk for auto suppliers that are struggling to make profits selling technology that has an established market.

The market

Eaton’s advanced engineering group in Rochester Hills, Mich., also is working with automakers to develop fuel cell components such as valves, sensors, superchargers and fuel flow management products, all of which Eaton already makes for internal combustion engines.

Eaton spokeswoman Laura Joseph would not reveal the company’s investment in fuel cell research and development, but says the projects are a priority.

In addition to working with BMW and Renault to develop solid oxide fuel cells for auxiliary power applications, Delphi Automotive Systems Corp. is dedicating resources to researching the polymer electrolyte membrane used in fuel cells.

Inside a fuel cell, a chemical reaction occurs that converts hydrogen to electricity and water.

A platinum catalyst on one side of the membrane causes hydrogen to split into positive and negative ions. Positive ions pass through the membrane and combine with oxygen to create electricity and heat.

Sensors and actuators have been identified as potential products for Delphi to supply, says John Weber, the Troy, Mich., supplier’s director of advanced energy products.

Federal-Mogul Corp. of Southfield, Mich., and Visteon Corp. of Dearborn, Mich., also are working on fuel cell technology, but would not disclose details.

BorgWarner says it is close to making a decision regarding its involvement on a fuel cell project with an undisclosed automaker.

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