GM Fills Up on Fuel Cells

General Motors (NYSE: GM  ) announced on Friday that it will move 500 of its fuel-cell engineers out from its research centers and laboratories and into core engineering functions. In practical terms, this means that the much-besieged automotive giant is getting serious about integrating fuel cells into its future vehicles.

The move is big, bold, and risky, but I like it. Let's first consider the downside. For starters, there is no guarantee that General Motors' fuel-cell technology will be superior to either Honda's (NYSE: HMC  ) or Toyota's (NYSE: TM  ) technology. For example, just last month, Honda announced that it will be fast-tracking its FCX fuel-cell concept car into limited production.

Secondly, there is the problem of infrastructure. According to the Department of Energy, there are only 31 hydrogen refueling stations in the United States. Thus, even if GM can manufacture fuel-cell vehicles for an attractive price, there is no assurance that consumers will be able to easily fill 'er up with hydrogen at their local "gas" station.

Finally, there is no guarantee that hydrogen fuel-cell technology is even the automotive technology of the future. With the advances being made in battery technology, it is entirely possible that hybrid vehicles -- and not fuel-cell cars -- will evolve into the next-generation automobile.

All of these risks are legitimate, but none of them seems to be a show-shopper. Yes, Honda is moving ahead with its fuel-cell vehicle, but recall that GM also unveiled its fuel-cell version of the Chevrolet Volt earlier this year. Furthermore, the real race isn't to get the cars into limited production but rather into full production -- which is precisely what GM's movement of 500 fuel-cell engineers is designed to do.

The infrastructure question is something of a red herring to me. It is simply not realistic to expect hydrogen refueling stations to be built first. General Motors is planning on placing about 100 of its fuel-cell vehicles in New York, Los Angeles, and Washington, D.C., later this year. If the project is successful, there is no reason to believe that fuel-cell vehicles might not first be offered in those cities, where a limited infrastructure system could still serve millions of potential consumers.

GM's decision to move forward with such a plan certainly has risks, but they pale in comparison with the danger of inaction. This is precisely the kind of move that, over the long haul, could help GM get its mojo back.

Keep up with your fellow Fools' opinions on automakers and thousands of other stocks at Motley Fool CAPS, our free public database for investor intelligence.

Fool contributor Jack Uldrich does not own stock in any of the companies mentioned in this article. The Fool has a strict disclosure policy.


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