Honda Sells FuelMaker Assets; CNG Converter to Get Natural Gas Pump Business

By John O'Dell May 1, 2009

By John O'Dell, Senior Editor

fuelmakerdevices.jpg Honda Motor Co., which pushed financially strapped natural-gas pump manufacturer FuelMaker Corp. into receivership last month, has found a buyer to keep customers for its natural gas-powered Civic GX supplied with home fueling systems.

The deal could do more than that, however.

The buyer, Southern California-based Fuel Systems Solutions Inc., also owns a major manufacturer of systems for converting gasoline vehicles to natural gas and is one of the biggest players in the European CNG vehicles market with plans to expand into the U.S.

Owning a fueling systems manufacturer opens the door to cross-marketing opportunities that could help it grow its business.

Fuel systems said this morning that it has agreed to acquire FuelMaker's assets and intellectual property through a European subsidiary.

Honda, FuelMaker's controlling shareholder and longtime business partner, said in a statement that it expects Fuel Systems to continue manufacturing and selling home-based natural gas refueling systems such as the Phill unit that many Honda Civic GX owners (including acquired when they bought their cars.

Warranty Protection

FuelMaker, based in Canada, manufactured and sold the Phill as well as a number of larger natural gas fuel stations for commercial applications.

About 14,000 FuelMaker compressed natural gas, or CNG, pumps are in use, mainly in the U.S., and Honda and Fuel Systems Solutions both said the sale, which still required bankruptcy court approval and is expected to close in the second quarter, would ensure continued warranty coverage and maintenance of the systems.

FuelMaker was pushed into bankruptcy liquidation early last month after the collapse of a deal to sell it to natural gas retail giant Clean Energy Fuels Corp.

2009-Civic-GX-635x204.jpg The Phill pump has been a critical resource for Honda in marketing the Civic GX, which is rated as the greenest production car sold in the U.S. because of natural gas' super-clean emissions and low greenhouse gas content.

Gasoline Alternative

Honda had been selling only about 400 natural gas Civics a year - mainly to fleet customers.

But demand blossomed a bit last year as gasoline prices soared and retail customers in California and New York - the only two states where Honda dealers offer the Civic GX to retail buyers - discovered the car as an economical alternative to gasoline-burning vehicles.

CNG typically sells for at least 50-cents a gallon-equivalent less than gasoline at retail pumps such as those operated by Clean Energy, and can cost as little as 60 cents a gallon in states such as Oklahoma and Utah were the fuel is plentiful and subsidized by governments or utilities.  

Natural gas fuel made at home with a Phill unit typically costs about $1 a gallon although the cost can vary widely depending on the local natural gas company's pricing policies.

Sales Increasing

The Civic GX, the only factory-built natural gas cart sold in the U.S., is also eligible for solo occupancy car pool lane stickers, making it an attractive commuter vehicle.

Because of the cheap fuel and carpool lane access, Civic GX sales last year jumped to about 1,000 of the cars and the mix shifted heavily to retail buyers.  

While sales have slowed this year because of the economic crunch and falling gas prices, Honda says it is on track to produce 2,000 of the vehicles for 2009.

The company anticipates an increase in demand as gas prices begin climbing later this year and as California begins implementing its just-approved low-carbon fuel standard that promotes use of fuels such as natural gas.

Not Cheap, But Easy

The Civic GX is a base model priced almost $7,000 higher than the comparably equipped Civic LX, but it is eligible for a $4,000 federal tax credit and, in some jurisdictions, for state ands local credits and incentives a that can eliminate the price premium.

The Phill fueling unit can run about $5,000 including installation (this could change with the new owners) and cannot be installed some areas because of restrictions by natural gas suppliers. It is eligible for a $1,000 federal tax credit as well as some regional discounts.

Our own experience with the GX and the Phill pump show that while natural gas prices in Southern California aren't low enough to deliver a quick payback of the cost of buying and installing a Phill, use of the pump is saves time and would, in times of gas shortages, let owners avoid lines and hassles at the gas station.

Growth Opportunities Seen

Fuel Systems Solutions' President Matthew Beale said the Santa Ana, Calif., company sees "significant opportunity" to boost sales of both commercial and home natural gas pumps in the U.S., where there is limited compressed natural gas availability and in European and other overseas markets where CNG is a more broadly accepted alternative to gasoline and diesel fuel for passenger and commercial vehicles.  

It is Fuel Supply Systems' MTM subsidiary in Italy that is actually acquiring the FuelMaker assets.

A separate Fuel Systems company, IMPCO Technologies, is a major manufacturer and marketer of aftermarket and original equipment natural gas flex-fuel systems for cars and tucks in Europe and Asia.

The company recently said it was reactivating its U.S. operations as well, initially to serve the commercial and government business where vehicle fleet operators are seeking ways to curtail use of gasoline and diesel for economic and environmental reasons.

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