DuPont-Honeywell Refrigerant at Risk After Mercedes Fires

An auto refrigerant developed by Honeywell International Inc. (HON) and DuPont Co. (DD) and forecast to generate billions of dollars in sales is being shunned by two of Germany’s largest carmakers after failing Daimler AG (DAI) internal safety tests.

Daimler says it won’t use the chemical and is recalling Mercedes-Benz cars that contain the product, defying a Jan. 1 European Union deadline to use the refrigerant in new models. Volkswagen AG (VOW), Europe’s largest automaker, is re-evaluating the product in light of Daimler’s tests and won’t use it “until further notice,” Jeannine Ginivan, a spokeswoman for the Wolfsburg-based company, said Dec. 20.

The Daimler tests surprised executives in the car industry and at DuPont and Honeywell because the refrigerant had already passed industry and U.S. Environmental Protection Agency evaluations. Honeywell, which spent more than a decade developing the product to meet environmental rules, says it’s waiting to see how the EU will handle Daimler’s objections.

“The key element for the EU government is forcing the implementation of their rule,” said Terrence Hahn, general manager of the U.S. company’s fluorine products unit. “If you are not doing that, you are going to severely dampen innovation.”

‘Total Surprise’

General Motors Co. (GM), the world’s second-largest automaker by volume, still plans to use the refrigerant, said Curt Vincent, its engineering lead for heating, ventilation and air conditioning. Daimler’s tests came as a “total surprise” to DuPont, partly because the “mild flammability” of the product was disclosed from the outset, said Thierry Vanlancker, president of the Wilmington, Delaware-based company’s chemicals and fluoroproducts unit. The tests don’t reflect “real life conditions” of a crash, he said.

No penalty is specified for not complying with the EU directive, according to Walter Puetz, director of regulatory affairs for Mercedes. The stance taken by Volkswagen and Stuttgart-based Daimler means other automakers may do the same, said David Doniger, a policy director at the Natural Resources Defense Council in Washington.

“Then the oomph goes away, the market doesn’t grow for DuPont and Honeywell and it could all start to unravel,” Doniger said by phone from Washington.

The move to the new refrigerant “will be fully enforced on Jan. 1,” the European Commission, the EU’s executive body, said in a Dec. 20 statement.

EU Directive

DuPont dropped 1.3 percent to $45.29 at in New York. Honeywell rose 0.4 percent to $65.

Refrigerants are non-corrosive chemicals that can be readily compressed into liquids and expanded into gas, creating cold temperatures. The DuPont-Honeywell product, HFO-1234yf, is designed to cut the global-warming potential of mobile air- conditioning systems. It reduces heat-trapping gases by 99.7 percent compared with HFC-134a, the refrigerant Daimler and Volkswagen plan to keep using.

The U.S. is encouraging use of greener refrigerants by giving automakers who use 1234yf credit toward new fuel-economy standards that take effect in 2017. The EU directive applies to significantly redesigned models in 2013 and to all new cars sold starting in 2017. Volkswagen has no models subject to the EU requirement in 2013.

Honeywell is targeting $1.5 billion of revenue from the chemical over five years, according to Hahn. DuPont, which competes for sales with Honeywell, expects its revenue from the refrigerant to climb 50 percent annually for five years, telling investors in 2011 that the product was among its “key growth opportunities.”

Crash Tests

Daimler’s tests were meant to simulate a high-speed crash on the Autobahn or on a Texas highway in summer, Puetz said by phone. B-Class sedans and competing cars were driven on a track at speeds up to about 160 kilometers (99 miles) per hour to heat the engine compartment to an extreme temperature of about 665 degrees Celsius (1,229 degrees Fahrenheit). A mixture of lubricant and Opteon, DuPont’s brand name for the refrigerant, was then released through a nozzle to simulate a broken line.

In each of more than 20 tests, an engine fire erupted, Puetz said. “Heavy flames” were extinguished except in one case where the car was allowed to burn to the ground, he said.

“We would significantly increase the risk of getting the car on fire in an accident” by using 1234yf rather than HFC-134a, which isn’t flammable, Puetz said.

Chinese Output

“Our goal is to always make the vehicle safer, or at least as safe as it was before,” he said. “If people burn in an accident, you can’t go back and say, ‘We relied on a statistical approach.’”

DuPont is waiting to see whether the EU enforces its directive before it “dramatically” increases production capacity at its plant in Changshu, China, Vanlancker said.

“The whole story with Daimler is throwing a wrench into our scale-up plans,” he said by phone.

At GM, engineers “were astounded” by Daimler’s tests because the German company participated in prior safety evaluations and didn’t raise flammability concerns, GM’s Vincent said.

GM in 2010 became the first carmaker to commit to using the new chemical, which is being used in new Cadillac and Chevrolet Malibu models, he said. The Detroit-based company stands by the product’s safety. It’s not difficult to design a test that ignites many of the fluids found under the hood, yet engineers find ways to mitigate the risk, Vincent said by phone.

Vincent chairs a panel at SAE International, an auto engineering group, to evaluate Daimler’s claims. Preliminary results will be announced in February with a final, independently reviewed report due by June, he said.

“We don’t think the Daimler test is very representative at all,” he said.

To contact the reporter on this story: Jack Kaskey in Houston at jkaskey@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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