Daimler, GM to Develop Hybrid Vehicle System

DaimlerChrysler and General Motors Corp. will jointly develop hybrid vehicle technology as they strive to catch up with Japanese rivals on the fuel-saving systems that reduce harmful emissions, the companies said Monday.

The automakers will develop a “two-mode” hybrid technology that will boost both acceleration and fuel economy by 25% and can be used on a wide variety of vehicles, the companies said.

The deal teams GM, the world’s biggest automaker, and German-American DaimlerChrysler, the global No. 5, against rivals including Toyota Motor Corp. and Honda Motor Co. , which have a head start in the hybrid market.

The “two-mode” hybrid system, adapted from GM’s transit bus hybrid on the market in some U.S. cities, uses smaller electric motors that work like a gear set to offer superior performance and fuel economy, said Tom Stephens, group vice president of GM Powertrain.

That allows the system to use a smaller conventional engine, making it more cost-effective than competitors’ hybrids, he said.

GM and DaimlerChrysler will spend “hundreds of millions of dollars” in development of the hybrid system, one reason they agreed to partner, Stephens said. The companies will sign a definitive agreement early next year, they said.

“We’ve both been looking for this kind of leapfrog technology that we think will be the one into the future,” said Eric Ridenour, executive vice president of product development at Chrysler.

GM will first use the system in late 2007 in its Chevrolet Tahoe and GMC Yukon full-size SUVs, Stephens said. Chrysler will follow shortly after with a hybrid version of its Dodge Durango full-size SUV and other hybrids, Ridenour said.

The SUVs will be sold in the U.S. market, where growing cash incentives have become necessary to sustain sales of large SUVs and new regulations in California threaten to curtail sales further.

Hybrids burn less fuel by adding one or more electric motors to a conventional gasoline or diesel engine. The batteries help power the vehicle and recharge automatically by capturing energy during braking.

The “two-mode” hybrid system will improve fuel economy at highway speeds and trailer towing ability, which are both key for the U.S. market, the companies said.

The system’s electric motors are designed to fit within the approximate space of a conventional automatic transmission.

DaimlerChrysler shares rose $1 to $46.83. GM shares fell 15 cents to $38.78. Both trade on the New York Stock Exchange.

Toyota’s Prius passenger car, launched in Japan in 1997, has emerged as the most popular hybrid, with U.S. sales of more than 47,000 this year.

Customers in the U.S. often have to wait half a year or longer to get one, despite a price premium of about $3,000 over similarly sized vehicles.

Honda began selling its third hybrid in the U.S. last week and Toyota has said it will eventually offer hybrids across its entire vehicle lineup.