Published Tuesday, December 14, 2004; Page E01


General Motors Corp. and DaimlerChrysler AG are throwing their combined weight behind a new hybrid technology for cars and trucks, setting the stage for what had been a niche product to spread to the mainstream for American consumers.


The popularity of Toyota Motor Corp.'s gas-electric hybrid Prius has forced the hand of manufacturers who once regarded the futuristic sedan as a fad. Buyers still wait months to get a $24,000 Prius, which was Motor Trend magazine's car of the year for 2004 and has become a pop culture icon.


Americans are showing lasting interest in hybrids partly because of concerns about high gas prices and instability in the Middle East. At the same time, Toyota and Honda Motor Co. -- which builds the Civic Hybrid -- have succeeded in winning state and federal tax breaks for people who buy such cars. Yesterday, the IRS announced that the new Escape Hybrid sport-utility vehicle from Ford Motor Co. also qualifies for a federal tax deduction. Virginia, California and other states have granted the cars exemptions for driving in high-occupancy-vehicle express lanes.


Those forces have become too much to ignore. While GM is still pushing toward a future of hydrogen-powered fuel cells and DaimlerChrysler has been touting super-efficient diesel engines, the companies yesterday said they will team up next year to develop a new hybrid system.


"This is enormously expensive technology to develop, but nobody can afford to be without it . . . because you've got the market driving this thing itself," said Lindsay Brooke, senior analyst at auto industry consulting company CSM Worldwide Inc.


The technology is infiltrating the marketplace, spreading far beyond the realm of the geeky little sedan. Ford's hybrid Escape is the first entry into the hottest automotive segment, light trucks, and the maker can't keep up with demand. This month, Honda began selling the Accord Hybrid, which uses an electric motor not just to save fuel but to goose a six-cylinder engine for high performance.


"Automakers are shifting their marketing strategy away from being 'green' towards 'guilt-free performance.' We believe this will propel hybrid technology into the mass market," Prudential Equity Group LLC analyst Michael Bruynesteyn wrote last month in a report to investors.


In 2004, Americans will buy about 80,000 hybrids, Bruynesteyn wrote -- a small fraction of the more than 16 million vehicles that will be sold overall. But he projected the hybrid market to climb to 470,000 vehicles in 2007 and to 3 million a year within a decade.


GM and DaimlerChrysler said yesterday that their new hybrid system will be more efficient than Toyota's. While it is unusual for two rivals to team up on cutting-edge technology, it's not unique; GM and Toyota run a factory together in California, for instance, and many automakers joined a government-sponsored effort to develop electric cars during the Clinton administration.


GM already has the new hybrid system under development and has built a version of it in large transit buses in partnership with its Allison Transmission unit. The city of Seattle recently bought more than 200 of the diesel-electric buses, which are said to get 60 percent better mileage than traditional versions. GM has been working to scale the system down for use in cars and light trucks.


The company is the industry's most vocal proponent of moving to a future of hydrogen-powered fuel cells, operating a fleet of hydrogen-powered vans in Washington and recently teaming with Shell Hydrogen to open a hydrogen fueling station in the District. Company executives still cast hybrids as a mere steppingstone on the road to fuel cells, but experts said yesterday's announcement shows that the company now realizes it has to take the technology seriously.


With fuel-cell technology at least 10 to 20 years from practical use, "the hydrogen solution is really too far away," said Charlie Vogelheim, executive editor of Kelley Blue Book. "So GM needed to jump on this interest in hybrids."


GM plans to have the system in its Chevrolet Tahoe and GMC Yukon SUVs by late 2007, and DaimlerChrysler will put it in the Dodge Durango by the following year, the companies said.


The Mercedes-Benz segment of DaimlerChrysler will roll out hybrids on a similar time frame, the companies said.


The announcement was a dramatic departure for DaimlerChrysler, which builds super-efficient diesel engines in Europe and has always favored diesel technology as a solution for better fuel economy. But diesels have been slow to overcome a bad reputation for smoke and noise in the United States, and the company sees the value in diversifying, a spokesman said.


"I don't think the market has decided yet just which technology at the end of the day is going to rule," DaimlerChrysler spokesman Michael F. Aberlich said. "In Europe, diesels have got almost 50 percent of the market, while in the United States, Toyota and others have had great success with hybrids and diesel is just starting to get a foothold. . . . It's a matter of having to look at the global realities here and realize that there are a number of different ways to go."


http://www.washingtonpost.com/wp-dyn/articles/A62110-2004Dec13.html