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KAI RYSSDAL: With the price of a gallon of gas idling at $3 territory, Toyota’s riding its fleet of fuel efficient cars to bigger and bigger sales figures. Today the competition fought back. GM, BMW and DaimlerChrysler announced they’re committing a billion dollars to developing a new hybrid engine. From the Marketplace Innovations Desk at North Carolina Public Radio, Janet Babin reports.

JANET BABIN: Hybrids like the Toyota Prius deliver great mileage around town, but their efficiency falls off when they hit the highway.

GM, BMW and DaimlerChrysler would solve that problem together.

The new engine has a mode for around town and a mode for the highway, so drivers could get better mileage in both places. And it will fit into rear-wheel drive sedans and larger vehicles like trucks and SUVs.

Peter DeLorenzo founded autoextremist.com:

PETER DELORENZO: “This is the first project that really goes after the needs of a large spectrum of the population. These people have families and needs for bigger vehicles, these people are not going to be left out anymore.”

DaimlerChrysler will put the new system to use in its 2008 Dodge Durango. GM will install it in some Tahoe and Yukon SUVs available at the end of 2007. BMW says it’ll use the technology in 3 to 5 years.

Brendan Bell with the Sierra Club applauds any effort to advance hybrid vehicle technology. . .

BRENDAN BELL:“I think what’s remarkable though, is that GM Daimler and BMW are about 10 years late to the party. The first hybrid vehicle was built in 1997, and Toyota and Honda are already leaps ahead of these companies.”

So, will the companies now make up for lost time? Perhaps. DeLorenzo says the dual-hybrid system is more sophisticated than Toyota’s. Backers say it has the potential to overtake all current hybrid technology.

In Durham, North Carolina, I’m Janet Babin for Marketplace.