updated 1/13/2008 4:50:23 PM ET 2008-01-13T21:50:23

General Motors Corp. said Sunday it has taken an ownership stake and formed a partnership with Coskata Inc., a renewable energy startup company that plans to produce ethanol from agricultural leftovers and municipal and industrial waste.

The announcement was made at the North American International Auto Show in Detroit after the two companies briefed reporters earlier at Coskata’s headquarters in this western Chicago suburb. The extent of GM’s investment and minority stake was not disclosed.

The partnership represents a rare foray by a major automaker into the production side of non-fossil fuels as GM and its rivals, under pressure from tougher U.S. fuel efficiency standards, pursue a mix of fuel-efficient vehicles and technologies.

GM Chairman and Chief Executive Rick Wagoner said it will take more than 12 years to replace most of the vehicles now on the road with more energy-efficient electrically driven vehicles.

In the meantime, ethanol is needed to decrease oil dependence “because there are already millions of flex-fuel vehicles on the road right now, for example, more than 6 million in the U.S. alone. Vehicles that could be running on ethanol if it were more readily available.”

If all the flex-fuel vehicles produced by GM, Ford Motor Co. and Chrysler LLC, plus those the companies have committed to producing by 2010, were to run on ethanol, they would displace 29 billion gallons of gasoline annually, or 18 percent of the projected petroleum usage at that time, Wagoner said.

“Nothing else we can do gets even close to that kind of impact that soon,” he said, adding that ethanol requires little change in consumer behavior.

The cellulosic ethanol being developed from Coskata’s biology-based technology won’t be available at retail gas stations until the end of 2010 at the earliest.

But the Illinois company maintains its process is commercially viable now and is a platform for producing other biofuels in the future. It aims to have a 40,000-gallon demonstration facility operational by the end of this year to deliver ethanol to GM for testing in its vehicles before building a 100-million-gallon commercial plant at an undetermined U.S. location.

Bill Roe, president and CEO of 18-month-old Coskata, said that at full production the company will be able to make ethanol for less than $1 a gallon. He said pump prices should dramatically reflect widespread production of the cheaper new ethanol by 2015 or 2016, when it expects to be building 20 to 25 fuel plants a year.

“GM is enabling Coskata to produce the next generation of biofuels — without using a food source — making it economically viable and commercially available,” he said. “Alternative transportation fuels are coming faster than people think ... and will be available at a lower cost than people have imagined.”

More ethanol is needed as the Big Three automakers ramp up production of flexible-fuel vehicles, with 6 million U.S. cars and trucks now capable of running on 85 percent ethanol blends and other biofuels to meet renewable fuel standards and reduce dependence on foreign oil.

GM has pledged to double its annual flex-fuel production to 800,000 by 2010 and make half its annual production E85-capable by 2012.

David Cole, chairman of the independent Center for Automotive Research, which receives a small part of its funding from auto companies, says GM’s move reinforces that U.S. carmakers are serious about developing alternative fuels. He calls the coming growth of cellulosic ethanol “a big deal.”

“Corn-based ethanol has never really been viable, it’s been driven by politics,” he said. “Once you’re into cellulosic or non-food biofuels, the resource base is very, very large and you’re talking about fuel at a buck a gallon. It changes the whole game.”

A growing number of biotechnology companies have been working to make cellulosic ethanol — long more costly than government-subsidized, corn-based ethanol — profitable.

Coskata’s three-step system — sending feedstock through gasification, a bioreactor and an ethanol recovery process — uses proprietary microorganisms and patented bioreactor designs that it is fine-tuning in its offices and laboratories in a Warrenville office park. It says the process is more energy-efficient than existing methods and will enable fuel to be made from a variety of non-food sources, even old tires.

The company says it can make more than 100 gallons of ethanol per ton of dry material, uses a third to a quarter the amount of fresh water for ethanol today and reduces greenhouse gas emissions by as much as 84 percent compared with conventional gasoline.

GM officials say they’re not concerned about ethanol becoming obsolete if the automakers are successful in rolling out plug-in hybrids in 2010. They note that the Energy Security Act that President Bush recently signed into law mandates 36 billion gallons of biofuels — principally ethanol — as automotive fuel by 2022 and every year afterward. Of that total, 21 billion gallons must be cellulosic ethanol.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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