The Vancouver-based company, which makes most of its money from selling light-duty fuel cells and engines and heavy-duty fuel cell bus engines, said late Thursday it lost $29.5 million US in its second quarter and made half the money it did in the same period a year ago.

"At present, we are between product cycles and our year-to-date revenues reflect that lull," CEO Dennis Campbell said in a conference call Friday. "This slack period, however, does not reflect a reduction in interest or commitment to automotive fuel cells technology."

To help turn things around and make its business more sustainable, Ballard will focus on fuel cell design, development and manufacturing, and leave systems integration to others, he said.

As part of that plan, Ballard plans to sell its stake in its German subsidiary - Ballard Power Systems AG, which develops fuel cell support systems - to its partners in the project, automakers DaimlerChrysler AG and Ford Motor Co. The deal is up for a shareholder vote Aug. 29.

That sale, along with a $30-million-US investment by Japanese partner Ebara Corp. and jointly owned Ebara Ballard Corp., should provide about $90 million to fund its next-generation auto fuel-cell electric drive and cogeneration development programs, Campbell said.

"Our decision to focus on fuel cells and leave systems integration to others is already starting to bear fruit," he said.

Ballard is already exploring opportunities dealing with its Mark 902 short stack - a scaled-down version of its automotive fuel cell, Campbell added.

"Several fuel-cell systems integrators have expressed strong interest in this product for material handling and back-up power applications, among others," he said.

Campbell said the company currently offers pricing in the $1,000-per-kilowatt range, but is "confident" it can offer "fully competitive pricing" - about half that cost - by 2010.

"We believe we can deliver unmatched cost, performance, reliability and durability that will enable us to become the supplier of choice among non-automotive applications, allowing players in those markets to concentrate their efforts on the systems side of the business, and leave the fuel cell design, development and manufacturing to us."

Ballard, which reports in U.S. dollars, said late Thursday it lost 24 cents per share, compared with 26 cents a year ago as revenue slipped to $9 million from $21.2 million in the same quarter of 2004.

Cash used by operations and capital expenditures for the quarter was $28.7 million. Ballard had $231.3 million in cash, cash equivalents and short-term investments on June 30.

Last month, Ballard signed a deal to sell its 50.1 per cent stake in its German subsidiary in exchange for nine million of Ballard common shares, which the company said it intends to cancel. Ballard said it is committed to reducing its outstanding share capital by 14 per cent, on a fully diluted basis.

The deal will also reduce Ballard's annual cash consumption by about $25 million US. Ballard will be reimbursed for net operating expenses incurred between Aug. 1, 2004 and the closing date of the deal, estimated to be worth at least $20 million US.

Ballard will continue to be responsible for the design, development and manufacture of vehicular fuel cells for its alliance partners, while DaimlerChrysler and Ford will be jointly responsible for the design, development and manufacture of the vehicular fuel cell support system.

Earlier this year, Ballard committed to offering commercially viable fuel cell technology for hydrogen-powered vehicles by 2010.

On Friday afternoon, Ballard shares (TSX:BLD) gained seven cents to $6.04 Cdn on the Toronto Stock Exchange.