Innovative Car Part Could Spark Company’s Success

SHERMAN OAKS —  Poke around in your car’s engine and you’ll probably find such things as oxygen sensors and catalytic converters that reduce smog-producing exhaust emissions. One day you also may find a Corona Discharge Device made by Litex Inc.

Litex executives, including Chairman Lodwrick M. Cook, the former Arco chief executive, hope their sparkplug-like contraption will someday be ubiquitous--the ultimate jackpot for a car part in the worldwide automotive market of 400 million vehicles.

The Corona Discharge Device faces skeptics, but Litex executives plan to roll it out as soon as this fall. They point to independent tests showing that the CDD sharply reduces harmful emissions with disarmingly straightforward technology, delivered at a modest cost.

The device works by electrically charging the exhaust gases, allowing the catalytic converter to operate more efficiently.

Arthur D. Little Inc., the Cambridge, Mass., invention management firm, has tested the Corona device for two years and reported that it achieves substantial reductions in hydrocarbons, carbon monoxide and oxides of nitrogen--the three exhaust gases that are transformed into less-harmful compounds by catalytic converters.

Based on those results, the Global Powertrain Congress in Stuttgart, Germany, awarded Litex its Powertrain excellence award in October, according to Ward’s Engine and Vehicle Technology Update. But the same publication also quoted an unnamed auto industry technology specialist as saying that the CDD “sounds too good to be true.”

Barry Cooper, vice president of technology at Johnson Matthey Catalytic Systems Division in Wayne, Pa., which supplies about one-third of the worldwide catalytic converter market, is buying a CDD prototype and plans to conduct his own tests.

“Without knowing the nature of the [Little] tests, if they were done under reliable conditions, we can’t say,” Cooper said. “But if you take it at face value, it’s worth a test.”

Litex has contracted with Saturn Electronics & Engineering Inc. of Auburn Hills, Mich., to design and build prototypes, which have been delivered for testing to several potential customers, including all the major domestic auto manufacturers, said Wally Tsuha, chairman and president of Saturn Electronics.

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Tsuha said it is too soon to gauge interest in the technology from manufacturers.

“Unfortunately it’s not something you can flip the switch and say it works, that’s it,” Tsuha said. Testing any system involving catalytic converters is a slow process, Tsuha pointed out, because the engines must be run for thousands of miles to determine performance.

Little’s primary tests involved running a V-6 auto engine on a bench for the equivalent of 200,000 miles.

“I believe it has tremendous potential,” Tsuha said. “It’s exciting to have this when precious metals prices are shooting through the roof.”

Litex President and Chief Executive Leon Ekchian quoted findings by Little indicating that the Corona device also gives catalytic converters longer lives and, in some cases, even reverses the ravages of wear and tear.

Ekchian was an executive at Lockheed Martin in Calabasas dealing with commercialization of technology when Lockheed initially developed the Corona device in 1995, taking out the first of two patents. He led the spinoff effort in August 1996 that created Litex, and the new entity continued the development process with four more patents.

He said Litex is a privately held firm financed by $17 million in venture capital, primarily from J.P. Morgan Investment Management Inc. of New York. It has 12 employees, mostly engineers.

In addition to its corporate headquarters in Sherman Oaks, the firm has a sales office in Bloomfield Hills, Mich., and a research and testing center near Boston. Ekchian said the company is researching applications of technology found in the Corona device, but at this time the CDD is its only product. There are no firm plans yet for an exit strategy that might include a public offering, he said.

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The planned Corona Discharge Device roll-out comes amid two key market factors: tighter restrictions on exhaust emissions enacted by the U.S. Environmental Protection Agency and rapidly climbing prices of key catalytic converter components.

Catalytic converters operate with so-called platinum group metals--palladium, platinum and rhodium.

Those metals react chemically with vehicle exhausts to turn them into less-harmful gases that are released into the atmosphere.

By practical application, the new U.S. Tier 2 standards that the EPA announced in December would require larger catalytic converters. The new standards signaled an increasing demand for the precious metals, and palladium spot prices responded by spiking at an all-time high at the end of December.

“By our estimate, the car sector is now absorbing the equivalent of total world palladium production alone,” Ross Norman reported Jan. 12 in the Ross Norman Commodities Report. Moreover, platinum at mid-January was running 18% above Jan. 31, 1999, prices, as indexed by New York Mercantile Exchange futures contracts.

Litex engineers estimate that the new EPA regulations being phased in will require catalytic converters in, for example, an average American sports utility vehicle to contain nearly an ounce of additional platinum group metals. But an SUV equipped with a Corona Discharge Device would require less than half an ounce of additional platinum group metals--the equivalent of $140 in savings, Litex says.

Ekchian said Litex is in talks with after-market wholesale kit manufacturers and distributors with an eye toward sales in auto-parts stores and repair shops. He said that initial production of 10,000 units a month is planned, and the Corona Discharge Device will carry a retail price of about $70.

Litex’s business plan calls for sales to original equipment manufacturers to start in 2002, with as many as six global licensors to serve the world market, including North America, Europe and the Far East.

As for regulatory approval, certification of the CDD as an after-market emissions component in California would be a simple matter, said Richard Varenchik, spokesman for the state Air Resources Board.

‘All we do is look at whether it will have a harmful effect on the vehicle emission system,” Varenchik said. “We don’t certify or verify any claims the company makes, like it makes emissions 50% less. We require them to have it tested, then bring us the results.”

Certification as a component of an original equipment emission control system is another matter, however. Tests are generally more elaborate--a 100,000-mile bench or dynamometer test, Varenchik said. Litex has not yet begun the formal application process for California certification.

The CDD would also require federal certification, and Litex’s Washington lobbyist, former U.S. Transportation Secretary Jim Burnley, said he has organized briefings for EPA and Department of Transportation officials.

“We got respectful hearings,” said Burnley, a partner in the influential Washington law firm of Winston & Strawn. “There will always be a show-me attitude toward this, but we have shown them. Arthur Little is a respected place to have testing done.”

But even as state and federal bureaucrats study the Corona Discharge Device, technical experts are fascinated with one interesting phenomenon: Nobody can explain exactly how it works, Ekchian admitted. He said the company is focused on testing the empirical phenomenon rather than theorizing about the wherefores.

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The CDD, in principle, operates between the engine and the catalytic converters. Drawing 25 watts of power, it creates a plasma--similar to the glowing ionized gas inside a neon lamp--that presumably reacts with the elements in the engine exhaust and enables the catalytic converter to operate more efficiently.

In a CDD-equipped engine running with fuel containing the national average of 300 parts per million of sulfur, hydrocarbon emissions were reduced 26%, carbon monoxide was cut 40% and nitrogen oxides were reduced 22%, the Little study said.

“The idea is that it changes exhaust gases,” said Dale McKinnon, deputy director of the Manufacturers of Emission Controls Assn. “That gives them more free radicals as they pass over the catalytic converter. The reaction is more easily performed or more favored.”

“It’s magic,” was catalytic expert Barry Cooper’s tongue-in-cheek explanation. Then he added: “If you get high-energy electrons floating around in an exhaust system, it is proven that they change the chemistry of the exhaust. The trick is to find how we can use that change in chemistry to the benefit in reducing emissions. And in such a way that it’s done more effectively than any other way you can do it.”

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Cooper said plasma research is also underway at places such as Ford Motor Co. and Lawrence Livermore National Laboratory but acknowledged that Litex has made an important step toward the market place.

By the time it arrives at the retail stores, Litex also may solve one of the new product’s biggest perceived drawbacks: a clunky name.

“If you have a suggestion [for something snappier], let us know,” Ekchian said. “We’ve tried a few. Corona Discharge Device started as sort of a place holder. Now the industry has started calling it a CDD and that tells me it is being well-received.”