Oil prices have fallen in recent weeks from record highs, relieving the anxieties of consumers and economists alike. However, OPEC recently signaled that it's not ready for the price of black gold to fall too far; the consortium's producers agreed last Friday to reduce production by a million barrels a day.
In light of these circumstances, word today that General Motors (NYSE:GM) DaimlerChrysler (NYSE:DCX) will join forces to develop hybrid drive technology seems timely. At this point, though, the two firms appear to be well behind Toyota (NYSE:TM), Honda (NYSE:HMC), and Ford (NYSE:F) in offering hybrid options. Toyota, in particular, is enjoying strong sales for its Prius as the model continues to enjoy plenty of attention. Some might suggest that DaimlerChrysler and General Motors should simply license existing hybrid technology; after all, Porsche is reportedly considering such a move.
However, General Motors and DaimlerChrysler may be seeking to develop a system that represents an advance over today's hybrids. It's certainly possible. General Motors, for example, has been working with a design that it feels improves on Toyota's Prius, according to Automotive Industries. Notably, this "two-mode" architecture can reportedly achieve at least a 25% improvement in composite fuel economy in full-sized trucks.
Granted, the team-up is a gamble, especially considering the lead that competitors have over the two firms. But if the new drive system performs as expected, both companies stand to benefit. In seeking to develop more fuel-efficient models, DaimlerChrysler has focused its efforts primarily on diesel, and given American's diesel aversion, the company's hedging of its bets with a hybrid makes sense. General Motors, meanwhile, has concentrated its research on fuel cell vehicles but does not expect to have a fuel cell model that can compete on cost with the gasoline engine until 2010, Bloomberg reports. The joint venture will allow General Motors to compete in the hybrid market with less cost burden.
Hybrids still represent a small piece of the American market, but more models are hitting showrooms every year, and sales look likely to grow. General Motors' and DaimlerChrysler's joint effort may represent the best way for the two automakers to take advantage of these trends.
Fool contributor Brian Gorman is a freelance writer living in Chicago. He does not own shares of any companies mentioned here.
