General Electric: Driving Towards an Electric Car Future

I wrote in a column back in April: "On November 11, 2010, General Electric (NYSE: GE  ) announced a grand plan to spend $1 billion buying electric cars for its workforce. Part of a strategy to first nurture, then dominate, the market for "plug in" car batteries and electric charging stations, GE would march in the vanguard of the Electric Revolution, converting half of its global corporate car fleet to electric power, and buying 25,000 electric cars over five years -- 'the largest single EV commitment ever.'" After getting off to a slow start, GE was finally beginning to deliver on its commitment -- and pledged to equip its entire sales force at GE Healthcare with gas-electric "Volt" hybrids from General Motors (NYSE: GM  ) .

The reasons were obvious. According to internal calculations, GE determined that gas-electric hybrids such as the Volt could cut fuel costs for the health care division by as much as 80%. What's more, as GE CEO Jeff Immelt observed: "By electrifying our own fleet, we will accelerate the adoption curve, drive scale, and move electric vehicles from anticipation to action."

Trouble in paradise
There was just one catch. While a fine car, the Volt is still, when all's said and done, just a car. And while cars are fine for moving people, they're simply not big enough to accomplish all the things a company like GE needs to get done. In April, therefore, GE issued a special exemption to its field engineers and other employees who needed to drive gas-powered SUVs and trucks, pending the arrival of electric vehicles large enough to suit their needs. GE knew such vehicles were coming. Ford (NYSE: F  ) , for example, had a C-Max Energi electric minivan slated for release in model year 2013.

Well guess what, folks? 2013 is just around the corner, and yesterday, GE got an early Christmas gift from Ford. Announcing its first major deal for the new C-Max Energi, Ford confirmed yesterday that GE has ordered not one, not two, but two thousand C-Max plug-in hybrids for its fleet -- "Ford's largest-ever plug-in electrified vehicle fleet sale," as the company said in a release.

Rated at 108 MPGe (miles per gallon equivalent) by the Environmental Protection Administration, versus 98 MPGe for the Volt, Ford's C-Max isn't just bigger than Chevy's e-car. It's better. According to Ford, between the vehicle's battery reserves and its gas engine, the C-Max is capable of driving 620 miles straight on a single tank of gas -- then filling up and continuing to motor on if it's got more driving to do. Oh -- and Ford says it's going to sell the things for a starting price of under $30,000 after federal tax incentives -- versus just over $31,000 for the Volt.

What's it mean to you?
This could be just the beginning of the good news for Ford -- which has struggled to interest drivers in its other electric offering, the all-electric Ford Focus. In one fell swoop, Ford's managed to outsell its own car by better than a 10:1 margin with the C-Max deal. But there are other beneficiaries as well. For instance...

General Electric
Thanks to Ford's quick work on the C-Max Energi, GE gets a chance to move one step closer to making good on its 25,000 e-car commitment. (Counting the C-Maxes, GE says it's now hit the 5,000 mark). In addition to all the savings on fuel costs it hopes to make from these e-buggies, this is a clear PR victory for GE.

The Ford deal also promises to expand adoption of GE's other energy infrastructure investments. For example, the company sells a product for charging electric vehicles on the go -- the "WattStation" charging tower. As part of its deal with Ford, GE wrangled a commitment from the automaker to promote usage of the WattStation by customers who buy its e-cars. So in one fell swoop, GE just won itself a sales force of thousands.

Clean Energy Fuels and Westport Innovations
You might not think a deal expanding usage of electric cars would be great news for companies gambling on natural gas as the fuel of the future. But in fact, this deal just might be good news for nat-gas engine designer Westport Innovations (Nasdaq: WPRT  ) , and nat-gas fueling station-builder Clean Energy Fuels (Nasdaq: CLNE  ) .

Part of the deal with Ford, you see, requires the automaker to also promote GE's "CNG in a Box natural gas fueling station." And a natural buyer of products like this is, of course, Clean Energy Fuels -- whose fueling stations aim to convert long-haul truckers to using compressed natural gas and liquid natural gas as automotive fuels.

Coincidentally, Clean Energy signed a deal with General Electric just last week, described as a "partnership" by the two companies, whereby Clean Energy would purchase "ecomagination MicroLNG plants" from GE. While the benefits here are more incremental than those for GE and Ford, a move by Ford toward broader promotion of natural gas as a fuel source should benefit Clean Energy by increasing its customer base. Similarly, more nat-gas users would appear to broaden the market for Westport's nat-gas engine technology.

Foolish takeaway
Of course, the one thing all these trends -- electric cars, gas-electric hybrids, electric charging stations, natural gas powered vehicles -- have in common is the fact that the letters "GE" keep popping up in every story about them. When you get right down to it, this week's e-car deal is good news for Ford, for Westport, and for Clean Energy -- but the biggest winner of all here is General Electric.

For GE, the recent financial crisis struck a blow, but management took advantage of the market's dip to make strategic bets in energy. If you're a GE investor, you need to understand how these bets could drive this company to become the world's infrastructure leader. At the same time, you need to be aware of the threats to GE's portfolio. To help, we're offering comprehensive coverage for investors in a premium report on General Electric, in which our industrials analyst breaks down GE's multiple businesses. You'll find reasons to buy or sell GE, and you'll receive continuing updates as major events unfold during the year. To get started, click here now.


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