The Ford Motor Company announced Friday that it plans to open its first-ever dedicated R&D center on the West Coast in Silicon Valley early this year—a move in line with the automaker’s vision of becoming a company that builds mobile computers on wheels.

K. Venkatesh Prasad, senior technical leader for open innovation with Ford Research and Innovation, the company’s advanced engineering arm, says the idea of opening a research lab in the Bay Area has been percolating for some time, waiting for the technology that facilitates programmable interaction between devices and cloud computing to mature.

“We’re ready to be in the Valley to shape and accelerate the delivery of automotive features,” Prasad says. “The timing is appropriate now.”

Ford intends for the lab to serve as a hub for independent technology projects, as well as a base from which to seek new research and investment partners located throughout the region. Prasad imagines that the Silicon Valley location will link the existing supply base with “new friends—not the people who would typically show up here in Detroit.”

“The most exciting thing is the potential for really interesting interactions with startups,” Prasad says, adding that if a startup has a particularly compelling idea that’s not up to scale, Ford is willing to step in and co-create.

The ultimate goal is for the new Silicon Valley lab to create an “innovation network” connecting Ford’s Advanced Design Studio in Irvine, CA, and Ford employees working with connectivity-platform partner Microsoft in Redmond, WA. Ford also plans to partner with Stanford and other Bay Area universities.

Competitor General Motors opened an “advanced technology” office in Palo Alto, CA, in 2006. Numerous European and Japanese carmakers also have outposts in Silicon Valley.

Prasad says that, like a typical startup, the Ford lab currently has two employees. He expects to have an infrastructure in place by the middle of the year. Ford plans to recruit local employees in addition to rotating in employees from other existing Ford locations.

Prasad emphasizes the Silicon Valley office will be dedicated to “new experiences in the marketplace,” whether they involve mobility, connectivity, safety, energy storage, or affordability.

“We don’t want to duplicate efforts in other areas, but to look and learn from Silicon Valley,” Prasad says. “There’s a whole new opportunity in consumer demand. Now we have a passport to enter a new frontier and explore together.”

Ford President and CEO Alan Mulally will elaborate on the new areas of focus for the Silicon Valley lab, plus Ford’s latest technologies, in Las Vegas at the consumer electronics tradeshow International CES on Wednesday.

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‘Tis the season to reflect on the past year and take a look at some of Xconomy Boston’s top stories.

As usual, these aren’t necessarily the highest-traffic stories (though in some cases they are). They are stories that exemplify what we are trying to deliver to our readers every day—narratives about the people, companies, and ideas that are shaping the future of technology, life sciences, and cleantech in our region, and across the country.

It was very hard to pick just 20 stories, like I usually do. I guess that’s a good thing. So I fudged it and actually picked slightly more—a dozen tech stories, and a dozen life sciences and cleantech stories.

In any case, our editor’s picks for 2011 span the fields of software, mobile, Internet, security, health IT, biotech, life sciences, energy, and hardware/materials.

They range in topic from people stories (Adriana Jenkins, Steve Jobs) to company strategies (Acme Packet, Vertex) to trends and analysis (big data, biotech risks); from universities (Harvard accelerator) to startups (MedicalRecords, Harvest Power) to big companies (IBM, Pfizer, Biogen Idec); from Q&As (Rob Day, Jim Baum) to company profiles (EnVivo, MC10) to news features (testing the nation’s first car collision-avoidance system); and from big community projects (Entrepreneur Walk of Fame) to cheeky area clusters (top 10 “boring” tech companies).

Here they are in their full glory, our top 20-ish stories of the year, sorted by sector:

Top 12 Tech Stories

Adriana Jenkins, Boston Biotech PR Maven, Dies from Breast Cancer at 41

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Urban Science, a Detroit-based company founded 34 years ago to help bridge science and marketing functions primarily for automotive clients, recently announced it has expanded to a larger and completely renovated 100,000-square-foot space. The new digs, at 400 Renaissance Center in Detroit, will accommodate Urban Science’s growing business and work force.

“People think of the Renaissance Center as GM’s headquarters, but we were there first,” says company founder and CEO Jim Anderson with a laugh.

The company got its first break in 1977, when Anderson was still a professor at Wayne State University. He got wind that Cadillac was in search of better technology to deal with the problem of mapping potential dealer locations. Anderson pioneered the concept of using a mainframe computer to generate dot mapping and the discipline of automotive network planning.

“It caught on like wild fire,” Anderson says. “Today, you can get a map for free on the Internet, so we’ve had to grow into other areas of our clients’ business. We bring sophisticated analytics to clients who are data-rich. Science plus marketing is better than marketing itself.”

Through the years, Anderson has taken Urban Science from a $50,000 company to a $125 million company with offices in the United States, Spain, the United Kingdom, Germany, Italy, France, Australia, China, Mexico, and Japan. Previously located in Tower 200 in Renaissance Center, Urban Science is now occupying four floors in Tower 400 with the option to add another floor next year. The move accommodates a 69 percent increase in staff over the last five years, which has brought the Detroit office workforce to more than 300. The company has more than 750 employees worldwide.

Anderson says the main goal with the expansion was to increase collaboration and connectivity with its other offices across the globe.

“The office is now almost littered with large screens that we use to connect with other offices,” Anderson says. “It used to require tens of thousands of dollars to get everyone in one place. Now it’s free thanks to the Internet and video conferencing.”

Urban Science also has the only office in the Renaissance Center with an interior staircase. In the middle of the four floors is a large, open area where employees can eat their lunches while gazing at the Detroit River. Anderson says that, too, is meant to be another opportunity for collaboration, though on a more informal level.

So now that Anderson has doubled down, so to speak, on Urban Science’s Detroit headquarters, how does he feel about Michigan’s prospects for the future?

“Urban Science has been through four recessions, three wars, and one oil embargo, and our revenue has increased every year,” Anderson says. “That’s because we offer to help our clients sell more stuff and save them money. But I wouldn’t have made the decision to expand here if I didn’t get the sense that things are turning around for Detroit and the state in general. We like doing business here. The quality of people we’re able to attract (as employees) is outstanding.”

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Waltham, MA-based A123 Systems (NASDAQ: AONE), the lithium-ion battery maker, has laid off about 125 employees at its manufacturing facilities in Livonia and Romulus, MI. The news originally broke the week of Thanksgiving and was reported by media outlets including the Observer & Eccentric and Crain’s Detroit Business.

The layoffs are apparently the result of lower demand from Fisker Automotive after its plug-in hybrid sports car ran into production delays. A123 invested in Irvine, CA-based Fisker early last year. Media reports quote Jason Forcier, the vice president and general manager of A123′s automotive group, and PR manager Dan Borgasano as saying the layoffs are temporary and the workers should be hired back within six months.

Forcier spoke with me last year around the opening of the Livonia plant. At the time, he noted that “the battery industry is really a rejuvenation for the whole area. This is extremely important for Michigan from an economic standpoint.”

A123 still employs about 600 people at its two Michigan plants and its research and development center in Ann Arbor, according to the Crain’s report.

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In Fairbanks, AK (where I spent a year after I graduated from college), winter temperatures can plunge to minus 40 degrees (F) for weeks at a time, creating ideal conditions for a local phenomenon called “ice fog.”

When temperatures get that cold, the air can’t hold much water vapor. Automotive engine exhaust is mostly water vapor, so emissions go from a maximum cylinder temperature of, say, 3,100 degrees (F) to minus 40 in a matter of seconds. Vapor cooled that fast forms tiny ice particles so small that 10 could fit side-by-side on the edge of a piece of paper. They also are so light that they remain suspended in mid-air—and of course each one is coated with fine soot particles. In short, the ice fog that eddies and curls through the winter streets of Fairbanks is a surreal cloud of pale brown murkiness.

It might seem like a remote problem, but the sub-arctic temperatures in Fairbanks visually illustrate a process that happens much less visibly with internal combustion engines everywhere.

Over the past decade or so, air quality regulations have focused chiefly on limiting the overall amount of soot emitted by internal combustion engines, but recent studies indicate that soot particles smaller than 100 nanometers can be especially harmful to human health. As a result, new “Euro5+” environmental regulations set to take effect next year are intended to substantially reduce the size and number of soot particles emitted by gasoline and diesel-powered cars and light trucks throughout Europe.

Some industry observers say it’s only a matter of time before U.S. environmental regulators impose similar restrictions on fine soot emissions.

Still, reducing soot emissions represents an unusual challenge for engine makers, in part because the targeted soot particulates in engine exhaust are nano-sized flecks of nothingness. (For the sake of comparison, the thickness of a human hair ranges from 50,000 to 100,000 nanometers.) Current methods of engine design rely more or less on the empirical results of trial and error, which can be a costly and time-consuming process when it comes to building and testing a series of engine prototypes.

So it was a welcome breakthrough when San Diego-based Reaction Design said recently it had led a consortium in developing software that can accurately simulate the formation of soot particulates during internal combustion. Engine designers can use the modeling software to … Next Page »

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If you want something done right, the old saying goes, do it yourself. That’s exactly what XL Hybrids, a Boston-based transportation tech startup, is up to these days.

Despite a thin layer of gloom that pervades much of the cleantech industry, XL Hybrids is advancing in its quest to make commercial vans and trucks greener and more fuel-efficient. The two-and-a-half-year-old company is announcing today it has appointed Richard Canny, a longtime Ford Motor exec and electric vehicle expert (former CEO of Think Global), to its board of directors. Canny is based in the Detroit area and gives XL Hybrids some more gravitas and deeper connections in the auto industry. But there are a lot of other things going on under the hood at this ambitious startup.

“We’ve been hard at work not only in technology development but also in re-examining our market,” says Justin Ashton, the company’s co-founder and vice president of business development.

Part of that re-examination includes ending a partnership that XL Hybrids had formed about a year ago with U.K.-based Ashwoods Automotive, which makes a vehicle retrofitting kit. The plan had been for XL to adapt the kit for the U.S. market. But XL found the process was taking too long, in part because European vehicles are so different from American ones. “It made sense to work on our own,” Ashton says.

So, XL Hybrids is handling the technology for commercial fleets by itself now. “Our strategy has shifted to doing all systems development [ourselves] but working with tier-one suppliers for components,” Ashton says. That means employing large battery makers and established electric motor manufacturers, he says. “Our role is to build the hybrid architecture from the ground up.”

The architecture consists of a hybrid electric powertrain (for which XL has patents pending) that can be installed on either existing vehicles or new ones. It includes a lithium ion battery, electric motor, and control software. The computer-aided design drawing of the system (see left) resembles a space-age tuba, or maybe a Star Wars pod-racing engine, but the point of the powertrain is to store energy wasted in braking and reapply it during acceleration. XL says this results in about 20 percent lower fuel consumption and emissions for high-mileage city driving, in standard cargo vans (typically made by GMC or Chevy).

Starting in January, XL Hybrids is working with commercial fleet companies to start pilot tests of retrofit cargo vans in the Boston area. If all goes well, there will be a couple dozen vehicles on the road around New England by June, Ashton says.

But he emphasizes that there is a bigger opportunity. “This business is not about retrofit. Long term, it’s about creating a unique hybrid powertrain for a large market,” Ashton says. “We can do retrofits where they make economic sense for our customers. But we have a lot of interest from customers in what’s called ‘upfitting’”—putting the technology into new vehicles.

Of course, this could be a difficult journey for a small startup—but XL is focusing on a market it thinks it can handle. “The real challenge in transportation is finding your path to get your product to market. And dealing with some of the largest companies in the world with long product cycles,” Ashton says. “We don’t want to wait. You have to find a business model that is relatively capital efficient, that leverages existing infrastructure.” He adds, “Right now we’re focused on a niche within a niche. The commercial vehicle side is dwarfed by the consumer segment. Our strategy is to position ourselves.”

XL Hybrids was founded by a team of MIT grads in 2009 and has about 10 employees. The company has raised roughly $4 million from angel investors and the Massachusetts Green Energy Fund. It says it plans to raise more money next year.

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Read part 1 of this post for background.

By the early 1920s General Motors realized that Ford, which was now selling the Model T for $290, had an unbeatable monopoly on low-cost automobile manufacturing. Other manufacturers had experimented with selling cars based on an image and brand. (The most notable was an ad by the Jordan Car company.) But General Motors was about to take consumer marketing of cars to an entirely new level.

Market Segmentation

General Motors had turned the independent car companies acquired by its founder Billy Durant into product divisions. But in a stroke of genius GM transformed these divisions into a weapon that Ford couldn’t match. With the rallying cry “a car for every purse and purpose,” GM positioned its car divisions (Chevrolet, Pontiac, Oldsmobile, Buick and Cadillac) so they would cover five price segments – from low-price to luxury. It targeted each of its brands (and models inside those brands) to a distinct economic segment of the population. Chevy was directly aimed at Ford – the volume car for the working masses. Pontiac came next, then Oldsmobile, then Buick. The top-of- the-line Cadillac offered luxury and prestige announcing you had finally arrived at the top of the conspicuous consumption heap. Consumers could announce their status and lives had improved by upgrading their brands.

GM had one more trick to make this happen. Within each brand, the top of the line was just a bit less expensive than the lowest priced model of the next expensive brand. The goal was to convince the consumer to spend a little more to trade up to a more prestigious brand.

Market segmentation by price was something no other automotive manufacturer had ever done. While other car companies could compete with one of GM’s divisions, few had GM’s capital and resources to compete simultaneously with the onslaught of car models from all five divisions.

Planned Obsolescence

While market segmentation allowed GM to use its divisions to reach a wider market than Ford or Chrysler, this didn’t solve the problem of market saturation. By the late 1920’s, most everyone in the U.S. had a car. And cars lasted 6 to 8 years. Even worse, the market was now filled with used cars that provided even lower cost basic transportation. Sloan, the General Motors CEO, faced two seemingly unsolvable challenges:

• How do you get consumers to abandon their perfectly fine cars and buy a new one?
• How do you turn a product that competed on price and features into a need?

In another stroke of genius, GM invented the annual model change. Sloan borrowed this idea from fashion where styles changed every year and applied it to automobiles starting in the 1920s. General Motors would change the external appearance of cars every year. Sloan preferred to call it “dynamic obsolescence.”

Styling and design became an integral part of GM’s strategy. Sloan hired Harley Earl to set up GM’s in-house styling staff. Earl would run it from 1927 to 1958.

Before Earl, cars were designed by in-house body-engineers who focused on practical issues like function, costs, features, etc. Each exterior component was designed separately to be functional – radiator, bumpers, hood, passenger compartment, etc. Some companies used third-party bodymakers to set the style , but GM was the first to take car design away from the engineers and give it to the stylists.

The concept of yearly “improvements”, whether styling or incremental technology improvements, every model year gave GM an unbeatable edge in the market. (Henry Ford hated the idea. He had built Ford on economies of scale – the Ford Model T lasted for 19 years.) Smaller car makers could not afford the constant engineering and styling changes they had to make to … Next Page »

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A Boston-area security tech company and the University of Michigan are involved in one of the most ambitious—and potentially controversial—transportation projects of our time. It could have major impact on federal legislation, and almost everyone you know.

Picture this: You’re driving in your car, approaching an intersection. Maybe you’re speeding a little, going 40 mph in a 35 zone, say. Unbeknownst to you, another driver is racing down the cross street and is about to run a red light (probably texting or something). This could spell disaster. But instead, your car picks up a wireless signal from the other vehicle. A beeping sound or flashing light on your dashboard alerts you to slow down, so you hit the brakes. Disaster averted.

Now let’s take it a step further. Maybe the alert is hooked into your car’s control system, so if you don’t put on the brakes, your car does it automatically. And maybe that’s fine with you. But you might be a little worried about giving up that kind of control in life-and-death situations. After all, computers get hacked and software crashes. Not to mention, you might not want your car broadcasting its speed and location out there for all to see (especially not the cops, since you were speeding).

This scenario isn’t the future. It’s happening already—at least the driver-alert part. In six cities around the U.S., trials of about 100 drivers each are underway to see how people react to in-car alerts (such as collision warnings, do not pass, and vehicle stopped ahead). But the next step is bigger. In Ann Arbor, MI, some 3,000 cars will be equipped with onboard wireless devices for communicating with each other and signaling to drivers when there’s an imminent hazard. This 12-month pilot study, which was announced recently and starts next August, is being led by the University of Michigan’s Transportation Research Institute (UMTRI) through a $14.9 million contract from the U.S. Department of Transportation. The state of Michigan has been heavily involved as well.

The goal of the federal initiative is, ultimately, to save lives. In the U.S., auto accidents are the leading cause of death for people aged 15 to 34; more than 30,000 people are killed on the nation’s roadways each year. The hope is that with new early-warning systems in place, a sizable fraction of would-be victims could be saved—some say 80 percent of non-alcohol-related cases—especially when high speed is involved.

The idea of wirelessly connected cars isn’t new, of course. The field of vehicle telematics has been around for years, with applications in fleet management, tracking, and safety. But advances in GPS location technologies, wireless communications, sensors, hardware, and algorithms are enabling smarter, better-connected vehicles to be tested on a bigger scale. And recent breakthroughs such as autonomous road-racing vehicles and Google’s self-driving car are starting to propel the technology into the mainstream.

Nevertheless, the Michigan study raises some serious real-world concerns. “This is a massive system with tremendous security and privacy implications,” says Ed Adams, the chief executive of Security Innovation in Wilmington, MA. And that’s exactly where his software security firm comes in.

Security Innovation developed the mobile software being used in the U-M study to … Next Page »

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It was the most advanced consumer product of the century. The industry started with its innovators located in different cities over a wide region. But within 20 years it would be concentrated in a single entrepreneurial startup cluster. At first it was a craft business, then it was driven by relentless technology innovation and then a price war as economies of scale drove efficiencies in production. When the market was finally saturated the industry reinvented itself again—one company discovered how to turn commodity products into “needs.”

They opened retail outlets across the country and figured out how to convince consumers to flock to buy the newest “gotta have it” version and abandon the perfectly functional last year’s model.

No, it’s not Apple and the iPhone.

It was General Motors and the auto industry.

In the Beginning
At the beginning of the 20th century the auto industry was still a small hand-crafted manufacturing business. Cars were assembled from outsourced components by crews of skilled mechanics and unskilled helpers. They were sold at high prices and profits through nonexclusive distributors for cash on delivery. But by 1901, Ransom Olds invented the basic concept of the assembly line and in the next decade was quickly followed by other innovators who opened large scale manufacturing plants in Detroit – Henry Packard, Henry Leland’s Cadillac, and Henry Ford with the Model A.

The Detroit area quickly became the place to be if you were making cars, parts for cars, or were a skilled machinist. By 1913 Ford’s first conveyor belt-driven moving assembly line and standardized interchangeable parts forever cemented Detroit as the home of 20^th century auto manufacturing.

Feature Wars
The automobile industry was founded and run by technologists: Henry Ford, James Packard, Charles Kettering, Henry Leland, the Dodge Brothers, Ransom Olds. The first twenty-five years of the century were a blur of technology innovation – moving assembly line, steel bodies, quick dry paint, electric starters, etc. These men built a product that solved a problem – private transportation first for the elite, and then (Ford’s inspiration) – transportation for the masses.

Market Saturation
Ford tried to escape the never-ending technology feature wars by becoming the low cost manufacturer. Fords River Rouge manufacturing complex – 93 buildings in a 1 by 1.5 mile manufacturing complex, with 100,000 workers – vertically integrated and optimized mass production.

By 1923, through a series of continuous process improvements, Ford had used the cost advantages of economies of scale to drive down the price of the Model T automobile to $290.

When the 1920’s began there were close to a 100 car manufacturers, but the relentless drive for low cost production forced most of them out of business as they lacked capital to scale. For a brief moment, half the cars in the world were now Fords. To make matters worse, … Next Page »

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K. Venkatesh Prasad has been working in Detroit for the past five years on an innovation that could be described as the next big crazy idea that might just work.

As the senior technical leader in vehicle design and infotronics at Ford Research & Innovation, Prasad oversees development of voice-activated apps and wireless services that would enable motorists to monitor their own health and chronic illnesses on the road.

During a panel discussion earlier this week at the Wireless Health 2011 Academic and Research Conference in San Diego, Prasad said development of in-car health and wellness technology is part of a broader effort to expand the capabilities of Ford’s SYNC in-car connectivity system. “We were saying if all we did was connect the mobile phone to an online digital music player that it wouldn’t be enough,” Prasad told me.

Ford’s initiative remains mostly in the R&D stage. While the Dearborn, MI-based automaker is looking broadly—and literally—at mobile health, Prasad said, “We’re not trying so much to prove out specific examples. These are really research experiments and investigations.”

Still, the company demonstrated just how its in-car wireless health could work in a Kona blue metallic Ford Edge parked outside the conference. Using voice-recognition software much like the SYNC system and “MyFord Touch” features available in current models of the crossover SUV, the car’s automated voice offered pretend guidance to address a low-glucose reading.

K. Ventkatesh Prasad

Ford (NYSE: F) has been working with Fridley, MN-based Medtronic (NYSE: MDT) to develop a prototype wireless health system capable of connecting to a continuous glucose monitoring device Medtronic makes for people with diabetes. Ford’s SYNC system uses Bluetooth to connect with the monitoring device, which would share its monitoring data with the SYNC system, which could then query the driver (or a passenger) and offer advice if blood glucose levels are too low or too high.

Ford is developing a similar prototype that could gather online data about pollen levels and other allergens, combine it with GPS-based contextual information, and offer advice to motorists with allergies, asthma, colds, and other sensitivities.

The work at Ford these days, however, is focused mostly on … Next Page »

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When Ecomotors International set out to change the way car and truck engines are built, it set up shop in Livonia, MI, a suburb of Detroit, in hopes of eventually licensing its technology to the big U.S. automakers. It was a calculated risk. As radical as Ecomotors’ opposed-piston engine design may be, at least the company’s founder, Peter Hofbauer, has unquestionable auto-industry credentials—he’s the guy who helped Volkswagen build its first mass-production diesel engine.

Pinnacle Engines isn’t even bothering with Detroit. The San Carlos, CA, startup, which recently won the backing of the world’s largest venture capital firm, is also developing an opposed-piston engine, one that promises to marry the fuel efficiency of diesel technology with the lower cost structure of gasoline-burning engines. But Pinnacle’s founder, James Montague “Monty” Cleeves, is a veteran of the semiconductor industry; for him, designing engines and tinkering with cars was always an avocation, not a profession. He’s pretty convinced that Detroit will never listen to his ideas—so Pinnacle is looking farther east for its first commercialization opportunities. Much farther east. To India, in fact.

“This ought to be music to Detroit’s ears, but to them I’m just some whacko in California,” says Cleeves. “This is Silicon Valley, and what does Silicon Valley know about making engines? Folks in Asia have almost zero ‘not-invented-here’ issues, whereas it’s pretty prevalent all over the U.S.”

Pinnacle won its first funding in 2007 and has been testing prototype engines based on its patented “Cleeves Cycle” since the spring of 2009. This year, Pinnacle struck a joint development agreement with an Indian scooter manufacturer—it can’t yet reveal which one—that could see the technology move to the test track by next year and into commercial production by 2013.

But to buy a Pinnacle-powered scooter, you’ll have to go to Mumbai or Bangalore. With gas prices here stable at around $3.50 per gallon, “I don’t know what it’s going to take to get somebody in the U.S. excited” about fundamental improvements to the venerable internal combustion engine, Cleeves says. “But most of Asia is sensitive enough about fuel economy that they get it.” For many families in India, a two-wheeler is the main mode of transportation, and a scooter engine that consumes 25 to 50 percent less fuel, as Pinnacle promises, could be a big boon for the household budget.

Cleeves says his engine can also be scaled up for larger vehicles, and can easily be modified to run on diesel, ethanol, or even compressed natural gas, which means it could also turn up in light commercial vehicles or even cars in India or China. But the startup, which has raised $13.5 million from venture giant New Enterprise Associates (NEA) as well as Bessemer Venture Partners and Infield Capital, doesn’t see its engine as a cure for petroleum addiction. Instead, Cleeves describes it as a bridge technology, incrementally improving the efficiency and lowering the emissions of internal combustion engines as a warming world weans itself from carbon-spewing technologies.

“It’s going to take a long while for Detroit to adopt new technologies,” says Pinnacle CEO Ron Hoge, a veteran of diesel engine maker Cummins. “They may surprise us—it may happen faster than we think. But it’s not even important to us on a business level, because the opportunities we are uncovering in Asia are going to be massive and much more accelerated and have a bigger impact on world consumption of petroleum.”

The basic concept of an opposed-piston engine is so simple that it’s remarkable how long automakers have been ignoring it. In a traditional engine, each piston sits in its own cylinder, and combustion occurs inside the cylinder head, where intake and exhaust valves regulate the inflow of air and vaporized fuel and the outflow of exhaust. In an opposed-piston engine, there’s no cylinder head: two pistons move toward and away from one another inside the same cylinder, with … Next Page »

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I visited GM’s Advanced Technology division in Silicon Valley on August 4, the same day the Detroit giant revealed its second-quarter financial results. The numbers were far better than one might have expected, given the automaker’s troubled recent history. GM said it brought in $2.5 billion in net income in the quarter, which was a bit less than it had earned in the previous quarter but nearly double the figure from a year earlier, back when the company was still mostly owned by Uncle Sam. The same day, GM said that its market share, after six years in free fall, has started to tick back upward.

Now, that’s encouraging data—but your mind is probably stuck a few sentences back, saying, “Wait, what? GM has an office in Silicon Valley?” Innovation, after all, isn’t a big part of the brand image at a company where the most iconic and profitable product is still the massive, gas-guzzling Chevy Suburban SUV.

But indeed, GM (NYSE: GM) does have such an office—inside a converted HP manufacturing facility in Palo Alto, on the same street with more conventional Silicon Valley players like WePay, mSpot, and Fry’s Electronics. GM doesn’t play up the facility’s existence in the press, and it took me more than a year to score an interview with its managing director, Byron Shaw. But once I’d toured the place and had a chance to quiz Shaw on his mission, I realized I’d picked a pretty appropriate time to visit. The situation at the office was—well, far better than one might have expected, given the automaker’s troubled recent history.

The biggest achievement for the 10-person outpost, which Shaw set up in 2006, is that it has managed to stay open for five years, despite the company’s bankruptcy, and broader turmoil in Detroit and the larger economy. “Surviving through the 2008-2009 downturn was key for us,” says Shaw. “We were able to maintain this operation without any cuts or loss of resources during that time. That was a big thing.”

Byron Shaw

But GM has a common-sense reason for keeping the Palo Alto office open, and it’s this: When you’re in your car, you’re not just driving anymore—you’re likely in “infotainment” mode, toggling between satellite radio, the GPS navigation system, cell-phone calls, and the like. Which means the components that make a car stand out in the marketplace are no longer made just from steel, rubber, or glass, but also from electronics and software. “The writing is on the wall,” says Shaw. “Look at what a car is today, and look at what it will be in 20 years. If you want to be competitive you have to have the best software and electronics in the industry, and you won’t get there if you don’t participate in Silicon Valley.”

Shaw’s squad doesn’t actually write software or build electronics. Rather, its job is to build relationships with all the people who do—so that when a new idea comes along that might make a future GM car better, the company knows about it.

Take Terminal Mode as an example. One staffer from Shaw’s office represents GM within an informal group of companies called the Car Connectivity Consortium (Honda, LG, Motorola Mobility, Nokia, Samsung, Sony, Toyota, and VW are also members). The consortium is working on a way to make the infotainment system in your car into an extension of your smartphone. The idea is to let you access the content and apps on your phone via the in-vehicle sound system and LCD displays, with all user-interface elements automatically optimized for use while driving. (Sorry, no Doodle Jump allowed.)

Terminal Mode is both a set of Internet-based standards for moving all this data around, and an emerging system for evaluating and certifying new apps to make sure that they don’t exceed driver-distraction guidelines. Shaw says that Silicon Valley is “pretty much ground zero” for the consortium’s negotiations over Terminal Mode. For GM customers, the benefits of the company’s participation will be … Next Page »

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President Barack Obama today announced that six Southeast Michigan-based companies would receive grants totaling approximately $45 million from the U.S. Department of Energy (DOE) to develop technologies used to make vehicles more fuel efficient. He made the announcement during a tour of Johnson Controls‘ advanced battery manufacturing facility in Holland, MI.

The Michigan companies receiving funding are Ford ($2.7 million), General Motors ($14 million), Chrysler ($10 million), Denso ($2.6 million), Vehma International of America ($10 million), and United States Automotive Materials Partnership ($3 million).

The DOE is awarding a total of $175 million to 40 projects in 15 states, which builds on the President’s recent announcement of fuel-efficiency standards for cars and light trucks of 54.5 miles per gallon by 2025.

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ALTe, the Auburn Hills, MI-based developer of a extended-range electric powertrains used to power light commercial vehicles, last week announced it will collaborate with the San Francisco-based Pacific Gas & Electric Company (PG&E), one of the largest utilities in the United States, on a powertrain project for the fleet industry.

ALTe will retrofit one of PG&E’s 2007 Ford F150 trucks with its plug-in series electric hybrid powertrain. PG&E will evaluate the performance of the initial ALTe-powered truck and provide real-time data and feedback.

“Pacific Gas & Electric has a fleet of over 12,000 utility trucks,” said ALTe’s CEO, John Thomas, “and the company is a leading-edge technology adopter—they’re always pursuing cleaner and greener technology. They offered one of their vehicles for retrofitting so we could evaluate our product’s true fuel economy in a mountainous setting like Northern California.”

The ALTe powertrain will include a 20kw lithium-ion battery pack, a four-cylinder engine, electric motors, and proprietary communication interface modules. The powertrain is projected to provide an initial 30 miles of driving in an all-electric mode powered directly from the lithium-ion battery pack. The vehicle can then drive an estimated additional 270 miles using a combination of battery and fuel power before the vehicle would need to be either refueled or plugged in. ALTe projects a 200 percent increase in fuel economy with increased torque, no loss in cargo capacity, and similar horsepower and towing capability as the original V8 engine.

The partnership is designed to allow PG&E to see the potential reliability and cost-saving benefits of the vehicle’s performance as it seeks to electrify its fleet while ALTe gains more exposure and gets valuable feedback on any potential ways to improve its product. Thomas says that although ALTe is working with several other large utility companies, he considers the partnership with PG&E to be an important milestone.

“PG&E is very selective in who they work with, so for them to take a risk on a small company like ours is … Next Page »

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It looks like A123 Systems is seeing some payoffs from the lithium-ion battery manufacturing facility it opened in Livonia, MI, late last year. Waltham, MA-headquarted A123 (NASDAQ: AONE) has nabbed a production contract from General Motors to provide the battery packs for an upcoming line of electric vehicles from the automaker, GM announced. The battery packs will be produced at the Livonia site. General Motors, which was previously testing the A123 technology in a development agreement with the company, did not disclose the financial terms of the production contract or which vehicles the A123 battery packs will power.

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The IPO market seems to be heating up around the country, but will Boston get left behind? A couple of local companies are trying to do their part, joining the likes of Kayak, Carbonite, and others that have filed papers to go public.

The latest ones are GI Dynamics, a medical device maker targeting obesity and diabetes, and Exa, which makes simulation software to help auto makers test aerodynamics and other features of their vehicles.

—Lexington, MA-based GI Dynamics has filed paperwork in Australia for an initial public offering of between $80 million and $95 million in Australian dollars—roughly $85 million to $102 million in U.S. dollars. Shares won’t be issued until August 11 at the earliest. Starting in 2008, Xconomy profiled GI Dynamics’ efforts to test and gain regulatory approval for its experimental intestinal liner that limits absorption of calories and nutrients in the patient’s gut, as well as subsequent developments. The company’s investors include Advanced Technology Ventures, Cutlass Capital, Domain Associates, Johnson & Johnson Development, Polaris Venture Partners, and Seedling Enterprises.

—Burlington, MA-based Exa filed a form S-1 with the SEC stating that it plans to raise up to $86.25 million in its IPO. Exa makes software for modeling complex fluid flow, which can be applied to problems of aerodynamics, wind noise, and heat management in cars and trucks. The company says it’s profitable and its annual revenues have increased for 17 consecutive years since its first commercial revenue in 1994. Its investors include Fidelity Ventures and Boston Capital Ventures.

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David Cole, the former chairman of the Center for Automotive Research, recently announced his new role as co-founder and chairman of AutoHarvest, a nonprofit website that aims to connect the auto industry with the local entrepreneurial ecosystem in order to market and commercialize intellectual property.

Once connected, members can build personal and company profiles; participate as a buyer, seller, or collaborator; showcase intellectual property and technology to other users; communicate through virtual think tanks; and form ventures and potential licensing deals with entrepreneurs and established companies.

AutoHarvest has already amassed a list of notable supporters and funders, including the Big Three automakers, Covisint, Delphi, TARDEC, Visteon, 3M, major Michigan universities, business incubators, and state and local economic development entities.

AutoHarvest’s website is still in the late stages of development in the Ann Arbor and Detroit markets, but it plans to launch globally next year.

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When Tianhai Electric North America won a $300,000 incentive from the Michigan Economic Growth Authority to establish a world headquarters in Orion Township this past May, it was the latest example of a Chinese automotive company choosing to locate operations in Southeast Michigan—and part of a growing trend that has the Detroit area playing an increasingly prominent role in the Chinese auto industry.

According to the Detroit Regional Chamber, at least 50 Chinese companies serving the auto industry have established new ventures in metro Detroit during the past decade—up from 5 in 2000. (See the list on the next page for some prominent players.) The companies range in size from a handful of employees to several hundred, but all are united in a common goal: to make better cars.

“China’s auto industry is booming,” said LianneYan, Executive Vice President of the Detroit Chinese Business Association. “But it’s trying to raise the quality of the cars it produces. Detroit’s strength is in auto parts and research and development, and that’s why the companies come here.”

Hong Su, Vice President of the Changan US Research and Development Center in Plymouth—which is wholly owned by Chongqing Changan Automobile, the first major Chinese automotive manufacturer to open a facility in the United States—said that Detroit is like no other place in the world in terms automotive know-how.

“Detroit has more than 100 years of design and development expertise, in addition to many experienced engineers and a whole spectrum of service providers, from tooling to testing to consulting firms,” Su said. “The biggest plus to doing business in Southeast Michigan is its concentration of talent, resources and supplies.”

Detroit’s century-plus of experience is something the burgeoning Chinese auto industry needs, as it wasn’t until 1956 that China’s very first road vehicle rolled out of the Changchun No. 1 Automotive Works. In late 2000, the first car to be made … Next Page »

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The economic deep freeze is thawing for IPOs on U.S. exchanges, according to a quarterly report issued today by the Ernst & Young accounting firm.

The number of companies in registration for an initial public offering increased to 140 during the three months that ended June 30, according to the latest the “Ernst & Young U.S. IPO Pipeline” study. That’s almost 24 percent more than the 113 companies that were registered during the same quarter last year, according to Ernst & Young’s data. Beneath story, I’ve put together a list of companies in the IPO pipeline for each Xconomy city as of June 30.

Ernst & Young says the 140 companies now in the lineup represent a potential total of $23.7 billion in estimated market valuation. That’s down from the $25.3 billion in total value during the same quarter last year, but the highest number of companies registered to go public since late 2007, when the financial crisis was beginning to engulf the U.S. economy. Just 28 companies were in registration at the end of the second quarter in 2009, one of the darkest periods of the recession.

A total of 42 companies went public on U.S. markets during the second quarter, a 13.5 percent increase over the 37 IPOs during the second quarter of 2010.

The warming trend is good news for the venture firms and other investors that view IPOs as a key way to keep the capital flowing to new companies, and to exit from startup companies with a return on their investments. Of the 140 companies in the IPO pipeline, venture capital firms back 40 percent, 31 percent are backed by private equity firms, and 23 percent are backed by both.

Technology-related IPOs accounted for 25 of the total companies in the pipeline at the end of the quarter, and they are trying to raise a total of $4.4 billion. The oil and gas industry was the next bigger sector, with 17 companies trying to raise a total of $4.6 billion. Other active sectors include financial companies, retail and wholesale, and diversified industrial products. Here’s a breakout of companies in the pipeline for each Xconomy city: … Next Page »

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[Updated 6/17/11 with terms. See below] Some big news in the world of speech software today. Burlington, MA-based Nuance Communications (NASDAQ: NUAN) is acquiring Zurich-based embedded speech software firm SVOX, Xconomy has learned from a source with knowledge of the deal. The acquisition price wasn’t disclosed, but is said to be in the triple-digit millions of dollars.

[Update] Nuance filed a Form 8-K with the SEC on Friday, which reveals the aggregate price was 87 million Euros (about U.S. $125 million)—57 million Euros in cash upfront, 8.3 million in cash or stock after one year, and 21.7 million in cash or stock by the end of 2012.

The deal seems to make sense for Nuance, which is trying to dominate the fields of speech, imaging, and communications technologies—especially speech.

SVOX, a profitable private company founded in 2000, develops speech interfaces for the automotive, mobile, and consumer electronics industries.

Nuance has an aggressive (and controversial) reputation when it comes to acquisitions of speech technology companies, as this recent Bloomberg BusinessWeek article details. The company has made a number of acquisitions in the Seattle area and has a sizable presence there—which is the subject of a separate story.

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