General Motors Co. remains high on the future prospects for E85 and says it will continue to expand the number of flexible engines it offers capable of running on the fuel.

But in a backgrounder ahead of his keynote delivery to the National Ethanol Conference in Orlando, FL, today, Tom Stephens, vice president-product operations, cautions against moving too fast into new directions, including increasing the content of ethanol in regular gasoline beyond the current level of 10%.

Stephens says GM is offering 17 ʼ10 models with the capability of running on any mix of regular gasoline and up to 85% ethanol content, and it is on the path to exceed its goal of 50% of its fleet with E85 capability by 2012 “provided there is steady growth in the fueling-station infrastructure.”

That lineup will grow, Stephens says, when GM adds flex-fuel capability to its upcoming Chevrolet Volt extended-range electric vehicle about a year after its initial debut in late 2010.

It also will go the flex-fuel route with its direct-injected engines, including their turbocharged versions.

The Chevrolet Equinox and GMC Terrain cross/utility vehicles will add E85 capability to their DI 4-cyl. engines next year. GM will follow that up with flex-fuel naturally aspirated and turbocharged versions of the Buick Regal. The Chevrolet Cruze’s turbocharged DI 4-cyl. also will run on E85.

GM has produced more than 5 million flex-fuel vehicles worldwide to date, Stephens says, and accounts for about 4 million of the 7.5 million FFVs on U.S. roads today. It says it costs between $10 and $70 per vehicle, depending on the model, to add E85 compatibility.

The big challenge, Stephens says, is to expand E85 fuel availability. Currently, there are some 2,200 E85 pumps in the U.S. About two-thirds of those are concentrated in the Midwest, where only 19% of the E85-compatible vehicle population resides.

“There are 160,000 gas stations in the U.S.,” Stephens says. “We don’t need all 160,000 (to offer E85). But we do need about 12,000.” That would make E85 available within 2 miles (3.2 km) of every customer, he says.

“This is an area where we need producers, retailers, and government to take action,” Stephens says in his keynote speech. “GM is spending about $100 million a year, adding flex-fuel capability to our vehicles. We can’t afford to leave this capital stranded.”

Cost of the fuel is another hurdle, but ground is being gained, Stephens says.

GM believes it will be able to reach a production-cost target of $1-$1.30 per gallon for cellulosic ethanol in its partnerships with Coskata Inc. and Mascoma Corp. It costs about $1.78 to produce a gallon of gasoline at a crude oil price of $75, according to the website thepriceoffuel.com.

But the lower energy content of E85 means pump prices will have to drop well below gasoline and diesel if Americans are to be convinced to make the switch, Stephens admits. And that may require some near-term government help.

“We have to get ethanol out there priced to the customer at a lower cost per mile than gas and diesel,” he says.

“Governments around the world have played a key role in enabling new markets through tax policy,” he adds, suggesting the U.S. may need to do the same.

GM is not opposed to increasing the content of ethanol in gasoline beyond the current 10%, but Stephens cautions more study is needed before hiking ethanol to 15% or beyond, as some have proposed.

“This is too important to make a mistake here,” he tells reporters, adding there could be issues with corrosion and other component failures in vehicles already on the road if ethanol content is increased.

“I would have no problem going forward of making capable the fuel tanks, diagnostic systems, valve seats” on future models to accommodate E15 gasoline, he says. “The problem is the vehicles already out there.

“We have a real concern that, if ethanol gets a bad name, it will be bad for everyone. A lot of activity needs to go on before GM recommends more than E10.”

GM does favor the installation of “blender” pumps that would allow consumers to dial-in the appropriate amount of ethanol as they refuel their vehicles, Stephens says. That potentially would allow newer vehicles to handle a higher ethanol content without causing damage to older models or other gas-powered equipment.

“Blender pumps will allow retailers to put both mid- and high-level ethanol blends into pumps that can be used for flex-fuel vehicles,” he says. “We believe these pumps will be a critical element in enabling consumers to choose the right fuel for their vehicles and other motorized equipment.”

Stephens downplays any criticism GM is investing $100 million annually in flex-fuel capability solely to earn credits towards its corporate average fuel economy rating in the U.S.

“I don't need this volume (of FFV vehicles produced) for an E85 credit,” he says.

GM is confident the U.S. will reach its goal of producing 36 billion gallons (136 billion L) of ethanol fuel per year in 2020.

“We think not only is that possible, but by 2030 we think we could be producing 90 billion gallons (341 billion L),” Stephens says.

dzoia@wardsauto.com