Bloomberg - the world's two largest carmakers General Motors Corp. and Toyota Motor Corp. are planning to set up a venture in the U.S. to build fuel-cell systems and engines to run vehicles without using gasoline, said three executives from the two companies.

The plan, dubbed ``Project Apollo,'' may begin with a U.S. research center and expand to a factory, the executives said, declining to give their names. Discussions for the project started in October and are part of Detroit-based GM's effort to produce commercially viable fuel-cell vehicles by 2010, they said.

``We have been studying alternative fuels for the last five years with GM,'' Toyota President Fujio Cho said at a Tokyo press conference yesterday, when asked about its collaboration with GM.  "If there is anything that the two companies can work on together, it would be good for Toyota and GM. That's the basic strategy,'' he said, without elaborating.

Toyota's sales of its fuel-efficient gas-electric Prius cars helped it earn net income of 291 billion yen ($2.8 billion) in the first three months of 2005, compared with GM's loss of $1.1 billion. A fuel-cell venture would tap a combined $20 billion the two carmakers set aside this year for capital expenditure and research, including studies of vehicles using alternative fuels.
 
``Fuel cells will be one technology that the two companies can work on together,'' said Koji Endo, an analyst at Credit Suisse First Boston in Tokyo. ``It makes sense for them to cooperate on future technology like fuel cells which is costly.''
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Toyota and GM will form a fuel-cell venture, Japan's government-run broadcaster NHK reported earlier today on its Web site, citing unidentified people familiar with the plan.
 
Consumers' interest in fuel-efficient vehicles is being stoked by rising energy prices. Pump prices for regular grade gasoline surged to a record $2.276 a gallon on April 8 and are 19 percent higher than a year ago, according to the AAA, formerly known as the American Automobile Association. 

GM and Toyota are among automakers planning to spend more to develop vehicles that cut emissions and use alternative fuels. GM, the world's largest carmaker, has made the development of hydrogen fuel cells a priority.

Toyota introduced the first gas-electric vehicles in 1997 and sees the technology as a solution for cutting gasoline use until fuel-cell vehicles become commercially viable.
The Prius, which sells for about $25,000 each in the U.S., can go as far as 55 miles on a gallon of gasoline, double the mileage of a car with a comparable-size engine.
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Toyota and GM began a joint study in 1999 to develop low- emission vehicles, including hybrids and fuel cells. The two companies in 2003 extended their collaboration until March 2006 to focus on fuel cells, Toyota said.
 
To contact the reporter for this story:
Kae Inoue in Tokyo at
kinoue@bloomberg.net and Jeff Green in
Southfield, Michigan at  jgreen16@bloomberg.net

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