At long last, fuel cell developer Ballard Power (NASDAQ:BLDP) has finalized its agreement with Ford (NYSE:F) and DaimlerChrysler (NYSE:DCX) to transfer the Ballard Power Systems AG business to its two larger partners.

This deal is a good news/bad news situation for Ballard. The bad news is that by executing this agreement, the company is surrendering its claim to about 40% of the value of an automotive fuel cell system, according to the company's earlier statements. That's a big chunk of the future to hand over -- especially when it's still unclear which parts of the automotive fuel cell system will really be the profit centers.

On the good news side of the equation, this frees up Ballard to focus even more on fuel cell development. Further, by handing over BPSAG, Ballard estimates that it will reduce annual cash consumption by about $25 million a year -- roughly one quarter of the present cash-burn rate. In addition, the terms of the deal will reduce the outstanding share capital base by 14% (meaning fewer shares outstanding) and will also provide up to $59 million in additional research funding from Ford and DaimlerChrysler.

But to quote a line from a CD in my collection -- so far, so good, so what?

Ballard still has a very tough row to hoe and plenty of well-funded competition in Toyota (NYSE:TM), General Motors (NYSE:GM), and Honda (NYSE:HMC).

Further, investors need to consider a few other issues. Namely, Ballard Power recently said that it will need a production level of about 500,000 units per year to be cost-competitive with internal combustion engines. To put that in perspective, Honda has been rather successful with its hybrid cars but has only just reached 100,000 units. In fact, the entire worldwide hybrid car business (which started in 1997) probably won't see 500,000 units sold until 2007.

What's more, Honda recently came out with its own projections on the future of fuel cell automobiles. It said that it is aiming to achieve price parity with gasoline engines by 2020 -- roughly the same sort of time frame that Ballard Power might see whether it can roll out a viable product.

There's no doubt that fuel cells are still a much-loved potential solution to high energy prices and pollution concerns. But with such a high cash burn and such a long timeline to viability, I just can't see a compelling argument to buy Ballard Power, though the stock has lifted from its recent lows by about 50%.

Fuel cell stocks will continue to dance around in time with company press releases, energy prices, and the future of energy bills in Congress. In the meantime, I'd skip the Ballard ballet for now and look instead at the likes of Plug Power (NASDAQ:PLUG) or Hydrogenics (NASDAQ:HYGS).

For more Foolishness on fuel cells:

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).