GM’s selection of LG Chem to supply battery cells for the Chevy Volt and other electric vehicles has all the intrigue of a spy thriller.
GM enlisted two teams to vie for potentially lucrative contract to supply battery technology for the Chevy Volt. One was a partnership between A123 Systems of Watertown, Mass. and German concern Continental Automotive while the other was LG Chem and its Compact Power Inc subsidiary. Our intrepid senior technical editor Chuck Murray wrote extensively of the competition.
The announcement that LG Chem had won was made today by GM at the North American International Auto Show in Detroit. LG Chem, Korea’s first chemical company, was spun out of LG Chemical in 2001, but still bears the logo of the huge Korean conglomerate, LG.
GM CEO Rick Wagoner this morning said in prepared remarks this morning that LG Chem was chosen because of its “demonstrated track record of performance, production readiness, efficiency, durability and exceptional quality.”
It’s difficult to find a mention of the win on LG Chems web site, but its subsidiary Compact Power (CPI) has it positioned prominently on its web site. CPI credits its “safer chemistry” without saying safer than what, unique ceramic-based cell separation technology and thermal efficiency and packaging for winning the GM deal.
The apparent loser, A123 and Continental, were not mentioned by name by Wagoner. He only mentioned that “two” groups were involved in the development of the batteries.
Here is what’s curious. On Jan. 7, A123 announced in a press release that it was applying for $1.84 billion in loans from the Dept. of Energy (DOE) to build up to 7 million square feet of lithium ion battery manufacturing space with initial efforts starting in southeast Michigan. Michigan citizens and politicians hailed A123’s plans. The press release quoted GM vice chairman Bob Lutz and several U.S senators supporting the company although somewhat vaguely. A123 said the initiative could create more than 14,000 jobs “at full operation.”
Then LG Chem is announced as GM’s big winner!? On Jan. 7, A123 still listed GM as a customer and maybe it still for a project other than the Volt. But what else is there at GM for the moment? An A123 Systems spokesman said the company could not elaborate because it was in “quiet period,” a fancy way of saying it is not talking. We got just as much out of Continental, which is best know for tires.
So here’s a few questions:
– What does venture-backed A-123 do now? As of Jan 7, it listed AES, BAE Systems, Cessna, Black and Decker, Chrysler, Project better Place and Think as customers in addition to GM. And its venture backers include some mighty influential players such as GE, Proctor & Gamble, MIT and Qualcomm. If indeed it has lost the GM bid which it appears, that would be more than a small blow. Has A123 signed up Ford or another big auto maker?
– GM may have bought itself a problem, too. It has taxpayer loans now and despite all its plans to build battery labs and plants in Michigan and around the world, it can’t escape that fact it selected a Korean and not an American company to make the key component for its batteries. Could this be a problem for the incoming president whose number one priority is getting Americans back to work?
– What did A-123 know when did they know it? Could its executives have been thinking on Jan. 7 that it was going to be GM’s key battery partner? Was the announcement a Hail Mary pass to convince GM that it would have the manufacturing prowess and capability to operate in the giant auto maker’s back yard? Did GM chose LG Chem in the 11th hour?
– Was it purely a technical decision and did LG Chem simply have a better approach for GM? The technical and economic exposure for GM is enormous so it’s hard to imagine the decision in any large way turned on politics. All intriguing questions … stay tuned.