Larry Burns, head of research and planning at GM, said the carmaker needed to move fuel cell propulsion from the laboratory to full development well before its 2010 deadline for proving that the technology is commercially viable.

Hydrogen-powered fuel cells have been seized on by governments and most carmakers as the long-term solution to pollution, global warming and high oil prices as they emit only water and the fuel can be made from renewable sources.

Mr Burns declined to say how much would need to be invested to produce a saleable car, but allocating significant money is likely to be a tough decision for GM. The company lost $10.6bn last year and faces heavy costs to close a dozen facilities and cut 30,000 jobs in North America, as well as demands for cash to help Delphi, its bankrupt former components arm.

"It is even more important to show our resolve and take a position on the future in these tough times," he said in an interview with the FT.

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.Typically an all-new vehicle costs at least $1bn to develop, while a derivative of an existing model would cost $500m or more. The new technology of fuel cells is likely to push the cost up significantly.

But GM is under pressure from rivals led by DaimlerChrysler and Toyota, who plan to start selling fuel-cell cars by 2012 and 2015 respectively. Honda has begun putting fuel-cell test cars on the road in California.

"We are not the only company driving hard to be first to market with fuel-cell vehicles," Mr Burns said. "You can safely conclude that if we are going to be on market [in time] then a decision needs to be made in the next year to 18 months."

However, Mr Burns suggested it might be possible to fund a new vehicle within the existing development budget, which is scheduled to rise by $800m to $8.7bn this year. No decision has yet been made on whether fuel-cells would be provided instead of an engine in an existing car, or whether an entirely new model would be produced.

GM has long argued that fuel cells have the potential to transform the industry, replacing complex engines and gearboxes with a fuel cell and electric motors containing far fewer parts.

Rick Wagoner, chief executive, opted to pour cash into fuel-cell development six years ago to put GM at the forefront of next-generation car design, and promised to be first to sell 1m fuel-cell cars. But the company missed out on hybrid petrol-electric technology, having chosen to focus on fuel cells instead, and is now trying to catch up with Toyota, which has scored a surprise hit with its fuel-efficient Prius.

GM delayed some hybrid and fuel cell projects last year when heavy losses forced a cut in the planned research budget, although the programmes were protected from cancellation, unlike other research.