The Wall Street Journal: Car Firms Bet on Biofuels

Volkswagen, Daimler
Buy Stake in Choren
In Bid to Be ‘Greener’
By CHRISTOPH RAUWALD
October 12, 2007; Page A10

FRANKFURT — Car makers Volkswagen AG and Daimler AG said they will take a minority stake in German biofuel company Choren Industries GmbH.

The German auto makers in a joint statement said they want “to speed up the broad market launch of the environmentally friendly synthetic biofuel of the second-generation BTL,” or biomass to liquid.

Volkswagen said it signed the contracts Thursday, but it didn’t provide financial details of the deal.

Spokeswomen for Volkswagen and Daimler declined to comment on the planned investment. The stakes of Volkswagen and Daimler will be the same size, the Volkswagen spokeswoman said.

Volkswagen’s and Daimler’s investment comes at a time when global auto makers face increasing pressure to reduce harmful emissions of their cars amid stricter emission regulations in all major auto markets. As part of an effort to make cars more environmentally friendly and more fuel-efficient, auto makers are investing heavily in initiatives such as hybrid engines, clean-diesel technology or alternative fuels.

The investment illustrates how German auto makers are increasingly betting on so-called second-generation biofuels — made from wood, straw or plant stalks — amid concern that boosting output of certain agriculture-based fuels will strain the world’s water and land resources, and drive up prices of basic foodstuffs to unacceptable levels.

While politicians, auto makers and farmers in the U.S. have touted corn-based ethanol as a home-grown alternative to imported oil, auto-industry officials in Germany — and at Volkswagen in particular — have said the process of making fuel from corn often requires as much energy and produces as much pollution as it saves. “If you take corn as an input, you’ll never get a proper carbon-dioxide reduction balance,” said Wolfgang Steiger, a Volkswagen executive who heads the company’s engine-research efforts.

Royal Dutch Shell PLC’s Shell Deutschland Oil GmbH has held a minority stake in Choren since 2005.

Choren has 230 employees and is building a biomass-to-liquid facility in Freiberg, Germany, that is expected to produce 18 million liters of BTL fuel annually from 2008. This translates into fuel for one year for as many as 15,000 cars. Choren also plans to establish what is known as a Sigma 1 facility in Germany with annual production capacity of 250 million liters of biofuel a year.

Separately, Volkswagen’s Chinese unit said Thursday that it raised its 2007 delivery target to 900,000 vehicles and is considering expanding its local car-making capacity.

–Stephen Power and Victoria Ruan contributed to this article.

Write to Christoph Rauwald at [email protected]

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