Bill Gates-backed EcoMotors to use funding to build more-efficient diesel engine

DETROIT — EcoMotors International, a lightweight diesel engine company partially backed by Microsoft co-founder Bill Gates, will use a new round of funding to continue the development of a new type of green engine.

The company received its third round of funding, this time for $32.5 million, it announced Tuesday.

The funding was led by New York-based Braemer Energy Ventures, Gates, and California-based venture capitalist firm Khosla Ventures. Both are previous investors as well. Gates and Khosla invested in the second round of funding as well.

EcoMotors said it has designed a diesel engine that has a 15 percent to 50 percent better fuel economy and costs 20 percent less to build. It’s called an “opposed piston-opposed cylinder” — or OPOC — engine.

It can be used wherever traditional diesel engines are required.

Customers and suppliers

EcoMotor’s customers include Illinois-based Navistar, a manufacturer of diesel engines and medium and heavy trucks, Wisconsin-based Generac, a manufacturer of generators, and Chinese auto company Jiangling Motors Co., which is investigating the engine for use in passenger cars.

The engine cannot be retrofitted to existing automobiles.

The company works with suppliers such as Borg Warner Inc., Federal-Mogul Corp., and Robert Bosch LLC to purchase parts for the engine. Federal-Mogul supplies pistons, and Bosch, injectors. EcoMotors has a joint agreement with Borg Warner to build an electrically controlled turbocharger.

EcoMotors CEO Don Runkle, who worked for years at General Motors Corp. in positions like president of engine and energy management and vice president of engineering, said Braemer was on a list of investors that never moved forward during the second round of funding in 2010. Runkle also helped spin out Delphi Corp. from GM.

Late last year, his team in anticipation of the funds drying up began pitching potential investors.

“We began to put our dancing shoes on and explain the value proposition,” Runkle said.

The EcoMotors engine features two horizontally opposed cylinders powering a crankshaft in the center. It eliminates traditional valves and cylinder heads, reducing the weight and number of required parts, and boosting efficiency.

EcoMotors said it has a two-pronged approach to making money: sell engines and sell patents to companies that build engines.

The $32.5 million will be used to continue developing the OPOC engine, start the development of a gasoline engine and begin working with compressed natural gas. Runkle said most will be used toward the diesel engine development.

EcoMotors plans to launch the manufacturing end of the business within five years, said COO John Coletti, who spent more than 30 years at Ford Motor Co.

Runkle said three investment bankers lobbied to raise money for the company, but the team decided to raise it themselves.

“We thought, quite frankly, we could do it ourselves and save the 6 percent,” Runkle said.

Eighth generation

EcoMotors is drawing up designs for the eighth-generation engine. The seventh-generation engine, in the testing phase, requires about half the parts of a normal diesel engine.

The company has plans to open a manufacturing plant in Southeast Michigan and separately is waiting to hear from the U.S. Department of Energy on a $209 million loan.

It’s relying on $63 million in tax abatements from the city of Troy, Mich., and the state of Michigan, though most of that money depends on employment, Runkle said.

In 2010, when the company was trying to raise money in Michigan for the project, it was turned down by local venture capital firms, including the 21st Century Investment Fund and the Venture Michigan Fund.

The team wanted to keep the money in Michigan but eventually went to places like California and New York to find it.

Runkle said he is keeping the two Michigan firms up to date, but EcoMotors might be outpacing them in price.

“We might be getting a bit too expensive now, and a little later-stage,” Runkle said.

The EcoMotors engine was conceived by Peter Hofbauer, former head of powertrain development at Volkswagen AG and founder of EcoMotors. Hofbauer, currently the chairman and chief technical officer at the company, brought the technology, like the OPOC engine, from his former enterprise, Advanced Propulsion Technologies Inc.

Eco got its first round of funding, $10.5 million, in 2008, and its second round, $23.5 million, in 2010.

Tom Henderson and David Barkholz contributed to this report.

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