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Wednesday, June 10, 2009

LG to manufacture Chevy Volt lithium-ion battery cells in Korea

LG Chem, the biggest chemicals maker in Korea, broke ground for the construction of a $800 million electric-car battery plant in Korea yesterday. The new plant, scheduled be opened in the first half of 2010, will supply lithium-ion batteries to General Motors from the second half of next year.

"We are running out of fossil fuels, and global warming makes the development of eco-friendly energy sources a key issue for survival," LG Chem CEO Kim Bahn-suk said in the groundbreaking ceremony. "The high performance, high efficient electric car batteries produced here will be a key ingredient for the futuristic and environmentally-friendly car technologies," he said.

LG Chem has started production of hybrid-car batteries at another battery plant in Ochang. The batteries will be used for Hyundai Motor's LPI Hybrid Avante and Kia Motors' LPG hybrid Forte, which are scheduled to be unveiled in July and September, respectively.

"The government aims to grow Korean green car industry to be one of the world's 'big four' by the mid 2010s, and I believe LG Chem will be a valuable partner for us," Minister Lee said. "The future of the electronic car battery will also decide the future of not only the global auto industry but also the energy industry in a larger sense," he said. LG Chem officials said global demand for electric vehicles will increase to 3.3 million by 2013 and 4.6 million by 2015. Annual revenue from the battery business is expected to top $1.6 Billion by 2015.

LG Chem Ltd., Korea’s leading chemical producer, said yesterday it plans to build a plant in the United States to supply electric car batteries to U.S. automaker General Motors Corp.

It had been a two horse race between Korea’s LG and US startup A123 systems to win the supply contract for the Chevrolet Volt. LG Chem and Compact Power Inc were one team and A123 Systems/Continental the second team selected from an initial field of 27 applicants to compete against one another to build the Chevy Volt’s battery packs. GM announced in September 2008 that it had chosen a battery supplier, but would not reveal which company that was. But has either team actually won?

General Motors Chairman and CEO Rick Wagoner announced at the North American International Auto Show that the Chevrolet Volt will use battery packs manufactured in the United States by General Motors. GM will establish the first lithium-ion battery pack manufacturing facility operated by a major automaker in the United States to produce the Volt's battery pack system. The plant will be located in Michigan, subject to negotiations with state and local government authorities. Facility preparation will begin in early 2009, with production tooling to be installed mid-year and output starting in 2010 to meet the Volt production start up schedule. LG Chem officials say they are considering building a battery plant in the United States, although a detailed schedule has not been decided yet, the company said yesterday

"The design, development and production of advanced batteries must be a core competency for GM, and we've been rapidly building our capability and resources to support this direction," Wagoner said. "This is a further demonstration of our commitment to the electrification of the automobile and to the Chevrolet Volt - a commitment that now totals more than $1 billion."

Until GM's battery facility is operational the Volt's lithium-ion battery cells will be supplied by LG Chem. Compact Power Inc., a subsidiary of LG Chem based in Troy, Mich., will build battery packs for Volt prototype vehicles. A joint engineering contract with Compact Power and LG Chem also has been signed to further expedite the development of the Volt's lithium-ion battery technology.

GM has been testing battery packs for the Volt, powered by cells from LG Chem, for the past 16 months. These tests - both on the road and in the lab - have provided invaluable insight into lithium-ion battery technology.

"Our selection of LG Chem was based on performance, production readiness, efficiency, durability and LG Chem's demonstrated track record of exceptional quality," Wagoner said. "At GM, we believe the technical strengths of LG Chem, combined with our own engineering and manufacturing expertise, will help position us as a key player in the development of electrically driven vehicles today and in the future."

It would seem at first glance a win for LG Chem but they will only have a contract to supply cells for Volt prototype vehicles. GM plan to have their production facility up and running by the time Volt production starts in 2010 from which time LG will only have a joint engineering contract. Unlike most Japanese automakers moving into electric vehicle manufacture who have established 50/50 joint ventures with established battery manufactures, for example Toyota and Panasonic, this announcement says the GM facility will be 100% GM owned. The GM battery plant will not just be assembling ‘packs’ from imported Li-ion cells supplied by LG but will be a battery cell manufacturing facility. LG owns several high volume Li-ion plants with the capacity to manufacture millions of cells per month. Through the joint engineering agreement they will share their expertise with General Motors whom despite owning patent rights to NiNH batteries in the 90s are new to the volume manufacture of li-ion battery cells.

Well can only hope that GMs second venture into the battery business produces better results than the first. In 1994 while General Motors were developing the EV1 they acquired a controlling interest over the patents for large nickel metal hydride (NiMH) batteries. Some EV1s used NiMH batteries supplied by Panasonic as did Toyota, Honda, and Ford battery electric vehicles. Unfortunately once GM had killed the EV1 program in 2001 GM sold their interest in the large NiMH patents to Chevron/Texaco who immediately sued Pansonic/Toyota and won a $30Million settlement with terms that effectively eliminated NiMH battery powered EVs in the United States until 2010.

As the industry wide electrification of the automobile gathers momentum GM has recognised the main profit centre of vehicle manufacture will move from production of internal combustion engines to the most expensive component in any electric vehicle, the batteries. General Motors battery manufacturing facility will not only keep EV profits within GM but will also create new ‘green’ US jobs.

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