After years of pitching the enormous potential of being the first to deliver a viable automotive fuel cell to the market, the folks at Ballard Power (Nasdaq:BLDP) appear to have abandoned all of their lofty dreams.



Ballard has agreed to sell its automotive fuel cell assets to Daimler AG (NYSE:DAI) and Ford (NYSE:F); meanwhile, Ballard will settle for making fuel cells for forklifts and other less exciting applications. Under the terms of the deal, Daimler and Ford will return 34.3 million shares they collectively own in Ballard for cancellation. Ballard will record an estimated $95-105 million gain on the transaction.

Concept Proved To Costly And Complicated
Despite the fact that Daimler and Ford agreed to continue funding fuel cell research with Ballard through a private company arrangement, it's clear that they've concluded that Ballard's dream of being the first to market with a commercially viable fuel cell for cars was simply beyond the reach of the company both financially and technologically.

Years of effort by Ballard had produced nothing beyond a small fleet of prototype test vehicles, while the company consumed massive quantities of cash on research and development.

New Scaled-Back Strategy Lacks Impact
So, now that it's abandoned its fundamental strategic raison d'etre, what does the company do from here on in? The official line is that the company will now focus on developing fuel cells for less challenging applications like forklifts - a market that is already being pursued by other fuel cell makers such as Plug Power (Nasdaq:PLUG) and Hydrogenics (Nasdaq:HYGS). Compared to the huge potential of the auto market, this looks more like a limited niche market play that is quickly attracting competitors. (For related reading, see Evaluating Green Equity Investments.)

Time To Change Horses
For the kind of one-trick-pony that Ballard has been over the years, I doubt if this new trick is going to be enough to hold investors' interest in the company. The forklift business simply doesn't have the sort of massive upside that automotive fuel cells. The dream of automobile fuel cells was enough to keep positive sentiment going through seemingly endless laps around the demonstration circuit.

Instead of being a sleek thoroughbred with big purse potential, it is now clear that this "pony" has more in common with its merry-go-round counterpart, which is only capable of going in pointless circles.

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Tickers in this Article: BLDP, DAI, F, PLUG, HYGS

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