General Motors Corp. (GM) and DaimlerChrysler have joined forces to develop an electric/internal combustion engine they say will provide both fuel economy and performance.

The “two-mode full hybrid,” as the companies are calling the design, was first developed by GM for city buses and uses two electric motors—one for stop-and-go driving and another that will provide an additional source of power at highway speed.

The two-mode system looks very much like a regular automatic transmission and mounts on the engine in the same manner. Inside that gearbox-style case is a variation on the usual automatic transmission with the two electric motors seated behind it. Like the Prius, one motor will provide all the power at low speeds using electricity generated by the gasoline or diesel engine that is stored in batteries. Unlike the Prius, the two-mode hybrid will use the second motor to provide an electric boost and greater fuel efficiency at those speeds.

The fleet of hybrid buses that General Motors promised would save Seattle more than 750,000 gallons of fuel a year will actually save less than half that amount, according to the fleet operator, and although G.M. said the hybrid buses would show a fuel economy improvement of up to 60 percent, the savings around the country appear to be in the range of 10 percent to 20 percent, transit managers say.