GM finally resolved its battery quandary, announcing at the North American International Auto Show this week that it was selecting Korean battery maker LG Chem's batteries for the first generation of Chevy Volt. The decision puts to rest months of uncertainty between LG Chem and its competitor for the contract, a team of A123Systems Inc. of Massachusetts and German auto supplier Continental (formerly part of Siemens). LG Chem is teamed with its Troy, MI-based subsidiary, Compact Power, which helped design the cells.
While the cells will be produced overseas, the Volt's battery packs will be assembled in Michigan. The batteries will likely be produced in a retooled midsize facility. As automotive assembly tooling is not very applicable to manufacturing the packs, they will likely need a freshly tooled line. The tooling cost to GM to achieve a volume of hundreds of thousands of packs could be $1B USD or more, according to a conversation DailyTech had with GM representatives.
GM's representatives said the decision to pick LG Chem over A123 was simple business, and that GM will continue to support A123's growth and development, calling the company a key business partner. According to these representatives, the key reason why A123 was not selected was the company's inability to hit mass-production scales by GM's 2010 launch date for the Chevy Volt.
Bob Lutz, GM's vocal vice chairman, stated, "A123 is still sort of a startup, they're still ramping up, and A123 has been specializing mostly in ...cylindrical cells, which are good with power tools and stuff. What we need here is prismatic, which is flat cells. And LG Chem is just farther along."
He continues, "And this is one of the things why we say, if we're serious about the electrification of the automobile, as part of the national energy policy we do need government support for advanced battery development, which of course Japan has... LG Chem has massive support from the Korean government in terms of a whole research campus was paid for by the Korean government because Korea recognizes that advanced battery technology is a key component of the country's competitiveness."
Prabhakar Patil, Compact Power's CEO, had no harsh words for his company's competitor, stating, "It's a business decision. Some people try to make it into an emotional issue but it really isn't. It's driven by the volume. The bigger question is actually infrastructure. The labor content in the cell is relatively low. So as a result, there is flexibility. But in order to make that kind of an investment, not only for LG Chem but for suppliers for materials, etcetera, that's a significant level of investment and therefore you need to have enough of a business proposition, sustainable business, and of course infrastructure."
He comments that the U.S. currently does not have the infrastructure necessary to support internal cell production, but is moving toward such a manufacturing base. He comments, "That's something that is evolving and I have to give state of Michigan a lot of credit for what they are trying to do to support that. That's something we continue to evaluate and when the time is right we are open."
Competitor A123 currently manufactures its lithium ion battery cells in China, but it has applied for federal grant money to build a plant in southeast Michigan. It hopes that bringing its production to the U.S. and building a large capacity will help it win a next generation Chevy Volt battery contract.
Ultimately, much of the jobs resulting from GM's final battery plan will be created in the U.S. as one of the most intensive parts of manufacturing battery stacks, is assembling cells, their cooling equipment, and other necessary equipment together into a finished product.