Ford Motor Co. has entered into an agreement with Azure Dynamics Corp. to provide the Toronto-based supplier with hybrid-electric vehicle powertrains for Ford E-350 and E-450 chassis-cab vans.

The vehicles will be used for commercial, governmental and military applications.

Contrary to media reports that say Ford will sell the vans directly, Azure says it will modify and sell the vans purchased from the auto maker. The vans are expected to be available in the ’08 model year.

“We’re the market leaders for commercial vehicles,” a Ford spokesman tells Ward’s. “So it’s only natural for (Azure) to buy the chassis cabs from us. We were very willing to help out. There are a lot of people that can supply the vehicle, but we met their customers’ needs.”

Both Azure and Ford decline to disclose the number of vans involved and if special pricing was arranged.

The heavy-duty HEV system was developed in-house by Azure, with guidance from Ford engineers, the spokesman says. “We did not have input on how (Azure) did what they did. But when you have an expert engineering staff here that’s well versed on hybrid systems, it’s only natural to communicate.”

The HEV system will result in fuel savings of up to 35% in E-Series vans powered by Ford’s 5.4L V-8 gasoline mill that has been modified with the Azure system, says Ron Iacobelli, Azure’s chief technology officer.

As with other gasoline HEVs, the Azure system touts regenerative braking, which captures friction energy during braking and uses it to replenish the system’s batteries.

In some ways, the Azure HEV system is similar to one utilized by Honda Motor Co. Ltd., Iacobelli tells Ward’s.

“The baseline product will launch with ultra capacitors, which we use with parallel hybrids,” he says. “It’s like Honda’s system, where the electric motor is inline with the conventional powertrain, so it’s best for highway use.”