DailyTech - Rejected By GM, A123 Gets Picked By Chrysler

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Blog: Auto Rejected By GM, A123 Gets Picked By Chrysler
Jason Mick (Blog) - April 7, 2009 11:41 PM

26 comment(s) - last by alphadog.. on Apr 21 at 8:29 AM

Dodge Circuit EV

Chrysler's pick for its battery supplier creates an interesting triangle between it and its competitor GM

GM, perhaps the domestic automaker with the most riding on the electric vehicle movement, picked LG Chem to produce the batteries for its upcoming electric vehicle, the Chevy Volt. Battery supplier A123 also pursued the contract, but was ultimately overlooked as GM ruled it was too far from producing batteries in sufficient volume compared to LG Chem.

Now A123 has been picked up by GM's competitor Chrysler, creating an interesting triangle in the domestic electric vehicle industry. As with GM, Chrysler's electric vehicle deployment, set for next year, is contingent on it avoiding bankruptcy and liquidation. Assuming it can, it will release the electric-drive Dodge Circuit, a new sports car, next year. The roadster will be powered by A123 battery packs, with a promised range of over 150 miles on a charge.

Soon to follow are EV-retrofitted Jeep Patriot and Wrangler Unlimited SUVs, Chrysler Town & Country minivans, and 200C midsize sedans. For the 200C, Chrysler has a similar scheme to the Volt -- a 40 mile gas-free range and a gas-engine to recharge the batteries, providing an additional 400 miles on a full tank.

By 2013 Chrysler plans for all three of its major brands to have electric vehicle offerings. Key to that plan will be a steady supply of batteries from A123.

Massachusetts-based A123 plans to use money from the Michigan battery stimulus package to finance a Michigan-based plant to produce battery packs. Cells will likely continue to come from Asia and shipped to the plant where they're assembled into the finished product. Besides Chrysler, A123 is hoping to use the plant to supply batteries to the Think brand of tiny Swedish electric cars and make a second effort at winning a serious GM supply contract.

Michigan Governor Jennifer Granholm praised A123's decision to invest in downtrodden Michigan. She says the investment comes "at a critical time in the automotive industry and in the state of Michigan" She says she looks forward to the companies working together "to develop and produce advanced technology in Michigan (to create) new jobs in the state, deliver benefits to consumers and contribute significantly to bringing more environmentally friendly vehicles to market."

Frank Klegon, Chrysler executive vice president in charge of product development praised the new partnership stating, "This is a great example of two American companies working together to put cutting-edge technology on the road."

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Seriously?

By jordanclock on 4/8/2009 1:32:12 PM , Rating: 5

They're making a battery-powered sports car? And this is supposed to help them how?

I used to think people were exaggerating when they said American automakers are out of touch with what the people want, but now I see it. They keep trying to build cars that appeal to our American sense of what things should be (Bigger, sleeker, more cargo space, more horsepower, etc.) and not about what Americans have come to realize they need. Who in their right mind is going to buy an ELECTRIC SPORTS CAR right now? Or any time soon?

I live just outside of Detroit, and I was against the bailouts when they were first proposed and I'm more so against them now. Big waste of money, that's all. These companies are the anti-thesis of efficiency and innovation.

RE: Seriously?

By Madcat1 on 4/8/2009 1:48:28 PM , Rating: 1

I couldnt agree more.

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RE: Seriously?

By Motoman on 4/8/2009 2:30:30 PM , Rating: 5

...you know, people keep saying things like "they're out of touch with the American consumer" - but to some degree I have to wonder if it isn't like the health food push in fast food.

There was/is this big push for fast food restaurants to offer "healthy" foods...so you see McD's et al putting up more salads, fruit cups, offering apple slices instead of fries, whatever.

...but people don't buy that stuff. What they want is a Big Mac. It seems like there's some social conscience that says our restaurants should have healty food on the menu - but we don't actually want to eat it.

My guess is that there's a large part of that in play with the Big 3 automakers. I think there's a socialized movement to pressure them into putting "healthier options" on their menu, but I don't honestly know that those options are what people want to buy. I think they'll keep buying the old-fangled models much more than going for the new-fangled.

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RE: Seriously?

By Bender 123 on 4/9/2009 9:25:49 AM , Rating: 2

Actually there was a recent study that found, that simply by offering the salad, people bought more french fries...Almost like it was a response to thinking "I considered the salad, so I feel good that I looked that way, but I like the fries better." Maybe Detroit is hoping that will happen with sports cars. "I am socially conscious. I seriously looked at an electric, but the shiny loud gas car is better."

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RE: Seriously?

By jcbond on 4/9/2009 9:46:08 AM , Rating: 3

I think you're right - and I think Rush Limbaugh agrees with you. I believe (I'm not verifying, though) that California is requiring electric vehicles, and that New York and a couple of other states are not far behind. Additionally theres a focus on EV's at the nation government level.
On the personal level, I doubt there's a market for EV's that could be sustained without artificial support (read requirements that automakers do what they have to do to sell x amount) from the government. No range, added complexity and cost. Most people wouldn't be willing to pay the true cost for an EV or hybrid, I think.

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RE: Seriously?

By alphadog on 4/21/2009 8:29:15 AM , Rating: 2

The truth is that hybrid sales have been picking up more and more market share, relative to backward-think models, and offering more and more relevant models. (The article's example is a good example of how US carmakers still don't get it.)

It's unfortunate that the US car industry had to be pulled in like a temperamental child, but now that US models will be made, maybe rednecks will start buying hybrids too, since you'll be able to stick a "Peein' Calvin" decal without having to suffer some sort of cultural whiplash....

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RE: Seriously?

By Machinegear on 4/8/2009 2:30:08 PM , Rating: 3

You are so right. When a bankrupt automaker decides to release a car with a price tag around 4x more than a house in the very region where the car will see final assembly does seem a little, just ever so slight, out of touch.

Circuit EV Price Guesitmates:

http://www.autobloggreen.com/2009/01/11/detroit-20...

Average Home Price in Detriot:

http://mjperry.blogspot.com/2008/07/yikes-avg-detr...

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RE: Seriously?

By tallcool1 on 4/9/2009 12:17:20 PM , Rating: 2

The only guestimate on your posted link was from some reader's comment on the article. Hardly a reliable source.

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RE: Seriously?

By Keeir on 4/8/2009 2:48:19 PM , Rating: 3

American Auto Makers have a problem.

They have relatively high cost of doing business thanks to outdated labor contracts, old inefficient factories and supplier contracts in addition to poor management.

They have the repitation as being low-quality, unreliable, low technology, and unefficient car designs etc.

Something has to give... either they can declare bankrupcy and in the process destory thier creditors, destory thier labor contracts, move thier facilities etc etc (Long Run probably better for the company) and move towards a Kia/Hyundai type of operation or they can try to reinvent themselves as High Technology, High Efficiency, and High Quality car makers and thus be able to charge a margin on thier products to support the high cost of current business. (More like VW or Toyota)

This electric sports car (and the other electric vehicles) are an attempt to do just that... in a form that the American public actually wants to buy.

Ford is the best off of the American Automakers... I think because they pushed "loss leaders" like the Escape Hybrid and integrated new technology like a 6 speed Automatic in a basic sedan. Ford has created the image that they are the "best" of the US automakers... whether this is true or not, and this has let them retain a small bit of extra margin on thier products.

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RE: Seriously?

By TheSpaniard on 4/8/2009 2:51:22 PM , Rating: 2

they would have done better to release the mini-van hybrid first, followed by the small SUV, then the large SUV, and finally the sports car

more likely is they are paper launching the sports car to drum up interest in the company for the above order.

if you REALLY wanted the sports car they would probably drum up production to get you one (you would be footing this bill) but other than that I dont see this vehicle entering production until after the hybrids prove themselves

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RE: Seriously?

By stromgald30 on 4/8/2009 6:16:28 PM , Rating: 2

I agree. There's a substantial market for electric minivans and SUVs. To save gas, people carpool more often these days, and more efficient people carriers are always welcome in the market.

An electric sports car isn't as bad of a concept as some of the earlier posts claim (see Tesla Roadster), but it really isn't a money maker. Too much of a niche market.

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RE: Seriously?

By TennesseeTony on 4/10/2009 8:36:25 AM , Rating: 2

Chrysler seems to be the only one doing the smart thing with hybrids...increasing the mpg of the heavys (across the board, not just one or two).

Nearly any small car will get you good gas mileage. SUV's, trucks, and people haulers are the ones that NEED improved fuel mileage.

Sadly, it may be too little too late. We shall see.

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RE: Seriously?

By TheSpaniard on 4/10/2009 1:25:30 PM , Rating: 2

well not really, they stand a good chance of being bought out (hopefully the purchasers continue these programs)

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RE: Seriously?

By clovell on 4/8/2009 3:00:52 PM , Rating: 2

I don't much agree. I see Tesla and I think to myself, 'Let's see how this pans out.'

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RE: Seriously?

By Moishe on 4/9/2009 11:19:28 AM , Rating: 2

I agree. Tesla is a different animal. New car company, new tech, new everything. It could turn out nicely.

I hope so, anyways

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RE: Seriously?

By CBeck113 on 4/9/2009 5:25:56 AM , Rating: 4

There are two important reasons why Chrysler is starting with a sports car: 1) their development partner and 2) the expected sales. 1) is easy to understand: that is a Lotus Europe reengineered with electrical drive, with Lotus doing most of the work. 2) is a little more difficult to understand, but in a nutshell: this will be their first electrical vehicle, and they have no real-world experience with this technology. Choosing a sports car keeps the actual number of units down, helps them save (some) money on testing with a larger profit margin (if they earn anything at all), and gives them time for the work needed for mass production: component size reduction (a minivan and an SUV have more constraints for their interiors than a sports car), reliability improvements and, most of all, cost reductions. Remember: they must make a profit with these mass market vehicles.

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RE: Seriously?

By rangerdavid on 4/13/2009 4:07:00 AM , Rating: 2

I should have read this post before I wrote mine - You are right on. Thanks.

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RE: Seriously?

By tallcool1 on 4/9/2009 12:23:49 PM , Rating: 2

Sorry but not everybody wants to drive a battery powered jelly bean that looks like crap!

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RE: Seriously?

By Lastfreethinker on 4/11/2009 11:31:30 AM , Rating: 2

Actually an electric sports car is a great way to advertise electrical vehicles. You get the population to see that performance isn't lost at all in switching over from gas to electric. They did it with CNG when they converted an old Corvette.

I would buy an electric sports car.

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RE: Seriously?

By rangerdavid on 4/13/2009 4:04:57 AM , Rating: 2

EVERYONE LISTEN UP.

The reason you start with a sports car is that you only have to manufacture a few, for a very select market segment. If your manufacturing process and supply lines are constrained or still being refined and matured, you can't launch a vehicle into a broader market yet. Companies generally only announce the availability of products they are ready to sell in quantities at least close to estimated demand - they rarely want to risk backlash from angry customers if wait times for backordered products increase because of delays, anticipated or not.

Thank you for your attention. Carry on.

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RE: Seriously?

By randomly on 4/14/2009 10:32:25 AM , Rating: 3

The sports car makes sense. They need to make an electric/green splash as a credibility booster.

For a first electric vehicle a sports car makes a lot of sense. Production will be limited and costs will be high so they need to aim for a small market with high prices that can absorb the high costs of the vehicle. That would be the sports car segment. Also the nature of electric motors lends itself well to making a very high performance and responsive car that would appeal to that tiny segment of the population that has the discretionary income to afford such a toy. Witness the Tesla roadster which outperforms Ferrari's etc. at speeds belowe 120mph.
It's the same business model approach that Tesla is using for their electric cars. Start with an expensive high end sports car and then move on to the higher volume luxury sedan when you've gone down the learning curve and can pull more cost out the vehicles.

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wow

By Moishe on 4/8/2009 9:10:21 AM , Rating: 2

Good that they're trying, cuz risk is needed to make stuff happen, but Chrysler picking up anything at this point seems almost foolish. I wonder if they have a contingency plan just in case Chrysler goes bankrupt?

Seems like A123 wouldn't want to get caught up in that, unless they too have debt and want to hide their own bankruptcy within the larger Chrysler action.

RE: wow

By mindless1 on 4/11/2009 12:40:33 AM , Rating: 2

By playing ball with the auto industry A123 gets a large tax break, so whatever batteries they can sell will be a boost to their bottom line by merely assembling them in Michigan. In other words their factory in China is probably under capacity.

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Th!nk Cars

By buckeyeman on 4/8/2009 10:27:12 AM , Rating: 3

The tiny Th!nk City cars are actually produced in Aurskog, Norway, not in Sweden. I consulted there in '99-'01 when they were briefly under Ford control. They have a pretty good thing going there. www.think.no