Ballard Focuses On New Business - The Car Connection

The revolution has stalled, but the maker of fuel cells is still looking for customers.
by Joseph Szczesny (2006-02-27)






Vancouver-based Ballard Power Systems sits at the leading edge of the fuel-cell revolution - but judging from the Canadian company's recent financial report, the revolution is on hold.



Ballard's partners include automotive heavyweights Ford, DaimlerChrysler, and Honda. And public-relations stunts are in full flower: DaimlerChrysler recently dropped off a fleet of experimental fuel-cell vehicles atLos Angeles International Airport for a long-term test. But overall, the development of fuel-cell vehicles appears to be stuck in the slow lane.



The goods news - for Ballard, anyway - is that it managed to reduce its financial losses to $83 million in 2004, which compares favorably with the $175.4 million loss the company posted in 2004. The company's cash reserves held steady at around $233 million and the company shipped or booked for customers in Japan orders for 221 stationary fuel cells. In addition, the cars and buses equipped with fuel cells logged more than 720,000 test miles last year.



However, revenue, a critical measurement for any kind of start-up or company dabbling in new technology, dropped by a third in 2005 to $53.7 million from $81.4 million. The sale of a European venture but the company's revenues also declined because key automotive customers deployed fewer test vehicles last year than they did in 2003 or 2004, according to the company's abbreviated financial reports.



Meanwhile, Ballard, which has been one of the pioneers in the development of commercially viable fuel-cell systems, is still holding discussions with another unidentified automotive partner, according to the company's latest reports. The company's automotive engineers also showed a fuel stack that could start at very cold 25 degrees below zero Centigrade and dropped off demonstration vehicles in Santa Clara, Vancouver, and Beijing, which is thought to be one of the world's great markets for futuristic fuel-cell vehicles.



Ballard also reported it was pushing ahead with efforts to commercialize some of the fuel-cell technology it has under development. However, at $73 per kilowatt hour, the energy Ballard has developed remains very expensive.



Thus, while Ballard is in pretty good shape, the financial results suggest that the automakers themselves have grown more skeptical about the prospects for some kind of a breakthrough in fuel-cell technology. Ballard noted the spending on engineering went up in 2005 but it's hard to detect any sense of real urgency or a breakthrough in the financial numbers.



John Sheridan, Ballard's newly appointed president and chief executive officer, said, "2005 was an important year for Ballard as we repositioned the company and developed a commercial strategy with a sharper focus, which has opened new opportunities for Ballard in materials handling and backup power markets."



"As well, our natural gas-fueled cogeneration fuel cell product captured the leading position in the Japanese market and Ballard-powered fuel cell vehicles continued to demonstrate outstanding performance in automotive markets around the world," Sheridan added.



Ballard's goals for 2006 are relatively modest. It is planning to continue its push into the residential cogeneration market in Japan by shipping 280 finished fuel cells. Another 300 Ballard-made fuel cells are destined from other customers, primarily in material handling, where they are used as a backup source of power.



In addition, Ballard will continue with its automotive experiments and its officials said last week the Canadian company is in an excellent position to meet the goals laid out in its technology roadmap.



However, despite the growth of its commercial business and relative financial stability, Ballard expects only modest growth in its revenue to around $55 million to $60 million this year.



Sheridan, who served as Ballard's non-executive chairman before accepting the chief executive role, also stressed the near term when he accepted the CEO role.



"While the fuel-cell sector has been through some tough times over the past few years, I'm excited by Ballard's repositioning and our near terms and mid-term opportunities," said Sheridan , "as we progress towards the longer-term value creation opportunities in automotive markets."