Nov. 8 (Bloomberg) -- Ballard Power Systems Inc., the largest maker of fuel cells for hydrogen-powered cars, will sell its automotive fuel-cell business to stakeholders Daimler AG and Ford Motor Co.

Daimler and Ford will swap their 34.3 million Ballard shares for the unit, Ballard said yesterday in a statement. The shares are valued at about $168 million and will be canceled, according to Burnaby, British Columbia-based Ballard.

The deal will let Ballard shift its focus away from fuel cells for vehicles after equipping only about 130 cars, trucks and buses since the late 1990s. Ballard last posted an annual profit in 1998, and its U.S. market value plunged to $614 million as of yesterday from a peak of $8.4 billion in 2000.

``It's a smart decision,'' Research Capital Corp. analyst Jonathan Hykawy in Toronto said today in an interview. ``It extends the time they have to make the company profitable and frees them up to do things with their capital.''

Hykawy rates Ballard as a ``sell'' and has no short position on the stock.

Ballard rose 16 cents, or 3.2 percent, to C$5.15 at 4:20 p.m. in Toronto Stock Exchange trading. The shares surged 11 percent on Nov. 5 on expectation of the sale, which was announced after the close of yesterday's primary trading.

New Investment

Ballard said Ford and Daimler will form a new fuel-cell company with an investment of $60 million, to be 50.1 percent owned by Daimler, 30 percent by Ford and 19.9 percent by Ballard. Ballard will invest another $60 million in the company.

Along with the assets, 113 employees, or 20 percent of the company's workforce, will transfer to the new operation.

Ballard will concentrate on other applications for fuel cells, including backup electricity systems, residential co- generation power supply and forklifts.

``Automotive fuel-cell technology development poses tough challenges,'' Chief Executive Officer John Sheridan said today on a conference call. A decade ago, he said, automakers expected commercial viability within five years, while their current projection is ``still eight to 12 years out in the future.''

Fuel cells create electricity in a chemical reaction that combines hydrogen and oxygen, ideally with only water vapor as a byproduct. They have been used on spacecraft since the 1960s. Ballard's fuel-cell stacks combine layers of plastic, carbon fiber and precious metals, such as platinum.

The company also reported a net loss of $16 million for the third quarter ended Sept. 30, compared with a loss of $17.9 million a year earlier.

Revenue from Ballard's products and engineering operations rose 54 percent to $17.6 million, the company said.

Ballard said full-year revenue from continuing operations would be $55 million and $65 million, up about 30 percent from 2006.

To contact the reporters on this story: Alan Ohnsman in Tokyo at aohnsman@bloomberg.net; Gopal Ratnam in Washington at gratnam1@bloomberg.net

Last Updated: November 8, 2007 16:36 EST