VIDEO: More about the Scuderi Air Hybrid Engine

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KAI RYSSDAL: We knew they were going to be ugly. I'm not sure we thought they were going to be this ugly, though. Carmakers came out with their July sales figures today. Ford down 34 percent. Daimler Chrysler off 37 percent from a year ago. They're not offering those big discounts they were last year. Consumers are also looking for more fuel efficient cars these days.

So they might do well to remember the contributions of one particular engineer and inventor. A man named Carmelo Scuderi. From the Marketplace Entrepreneurship Desk Steve Tripoli has the story.

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STEVE TRIPOLI: Carmelo Scuderi moved into retirement in 1994. But he couldn't let go of a problem that had irked him for a long time. He felt that the internal combustion engines in everything from cars and trucks to generators were just too inefficient. He thought they could use less fuel, and spew out fewer emissions.

Carmelo played and played with ideas. He had a promising design on paper. Then he got sick. His son Nick went to visit and discuss the project.

NICK SCUDERI: He used to say, "I'm not ready for the box." And he made it clear to us that, when he was sitting in the hospital that, he wanted us to take this on and move forward with it. He knew it was going to have a big impact on the world.

Nick is one of Carmelo Scuderi's eight adult children. When Scuderi died they were almost ridiculously ready to carry on. Son Steve says their dad's influence had seen to that.

STEVE SCUDERI: He's half inventor and half entrepreneur, and at the same time he's all inventor and all entrepreneur. He was very good at both of those things.

Steve is an engineer whose interest in protecting his dad's ideas led him to patent law. Another son, Sal, followed Carmelo into engineering and business planning. Nick has experience in worldwide marketing. Angelo handles business development.

The eight Scuderi siblings all turned their attention to carrying out Carmelo's legacy. Six of them full-time. An ambitious startup called The Scuderi Group was born. Almost all the startup team's needed skills were, literally, in-house.

SCUDERI GROUP AUDIO: The Scuderi engine's inherent capacity to capture and store compressed air energy has vast implications for the engine market. . . .

Carmelo Scuderi's original drawings outlined what the company calls the Scuderi split-cycle engine. Split-cycle engines have been around for a century, but the siblings say Carmelo's design is unique. They say the Scuderi engine has found a low-cost way to increase mileage and lower emissions. It also captures compressed air and turns it into power in the way current hybrid engines turn braking energy into power.

A company promotional video touts this so-called "air hybrid" design.

SCUDERI GROUP AUDIO: The Scuderi engine's ability to burn fuel far more efficiently and cleanly, particularly in its diesel version, can benefit the world on a macro scale. . . .

The Scuderis commissioned an independent laboratory to evaluate their plans. The lab, Southwest Research Institute in Texas, reported theoretical potential but also "Significant technological challenges." Southwest is now building two prototypes that will be a major test of the engine's viability.

Investors have been voting with their dollars.

About 300 Scuderi investors recently gathered for a progress report at the Basketball Hall of Fame in the family's native Springfield, Mass. Small investors have provided most of the Scuderis' $15 million in startup money. The Defense Department threw in $1.2 million.

A sign-in list at the event shows the family's backing is heavily local. No investor we interviewed came from more than 50 miles away. Many made it clear that the family's local ties and reputation, plus the engine's potential, drew them in.

WOMAN 1: Like, 2-1/2, 3 years ago. Even though it was a shot in the dark, just somethin' about it really grabbed my interest and I've kept with it.

MAN: Carmelo Scuderi, if he hadn't believed, if he hadn't had the evidence to know that this was gonna go, he would have dropped it and gone on to something else.

WOMAN 2: People take risks on things that aren't worthy all the time and we just thought we'd take the risk on this.

And it is a risk.

Jaal Ghandhi of the Univeristy of Wisconsin's Engine Research Center says the family is part of a very long line of engine tinkerers whose ideas look good on paper. Ghandhi says getting a real-world prototype to deliver is often a different matter.

JAAL GHANDHI: Being able to make it and make it work over the wide range of sorta speeds and loads that you see in your car is pretty difficult and very few things have actually made it past that litmus test.

The Scuderis aren't fazed by doubters. Nick and Steve say they're betting on the guy who started all this.

STEVE SCUDERI: It's not really us. It was my Dad. I mean, he did it before and, I know he's going to do it again.

This isn't just the Scuderis' unfinished business. Their friends and neighbors are all along for the ride now too.

I'm Steve Tripoli for Marketplace.