Detroit Auto Show: GM gets U.S. bailout, buys Korean

After a long and brutal competition, General Motors has picked a winner in the two-way competition to produce the battery for the Chevy Volt. It ain't the American guys.

At a news conference today at Detroit's North American International Auto Show, GM's chairman and chief executive, Rick Wagoner, said the company had selected South Korean giant LG Chem over Massachusetts-based A123 to produce the lithium ion cells for its long-awaited extended-range electric car, due out late next year.

Wagoner said that GM would assemble the T-shaped, 16-kilowatt-hour battery in the U.S., most likely in Michigan, and that GM would open the country's largest battery research lab, also probably in Michigan.

But the vital task of producing the essential cells for the battery will rest on LG's shoulders, and although GM said it would continue working with A123 on other projects, it's a clear victory for the Koreans and a letdown for team U.S.A.

According to Bob Lutz, GM vice chairman, the A123 product was "very good" but the company simply didn't have the expertise in the kind of chemical structure that the automaker feels is essential for the car. "LG just has a several-year head start on them," Lutz said.

A123 is best known for producing the lithium ion batteries in cordless power tools, but it has been working hard on the technology required for automobiles for several years now. News that it had not made the cut was greeted with some surprise in the car world.

After all, the clear intent of Congress, repeated over and over in the auto industry hearings late last year, was that any money the automakers received in loans would be spent on U.S. operations, terms that the heads of the Big Three automakers vocally consented to under questioning.

And while car companies source parts and supplies from all over the world, the decision to pass over the American option might not be smiled upon in Washington, which will be further weighing the fate of GM and Chrysler in coming months.

For his part, Lutz said that the problem lies not with Detroit, but with Washington, which hasn't helped fund the kind of research that other countries routinely back. Choosing a South Korean company to make the guts of what is inarguably the most important part of the most important car GM has had in its pipeline in decades, Lutz said, "is part of the penalty we pay in the U.S. for not having a well-funded R&D budget."

Furthermore, Lutz said, the job of assembling the battery and integrating it into the vehicle is a much more critical and complicated process (read: lots of jobs).

LG's chief executive, Peter Bahn-suk Kim, said that the company would build the first generation of the cells in South Korea, but left open the possibility of producing them in the U.S., through its subsidiary here, in the future.

-- Ken Bensinger

Photo credit: General Motors

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Comments

[miath]

good choice by gm....specialy the goverment from korea push the technology and finance,the only thing usa finance is the war technology.

[Ryan Stillinger]

Mr. Wagoner is one hell of a salesman to fool 100 senators, o wait he didn't, he only fooled the man who apparently can get fooled again.

Aside from Wagoner's lies, the choice of moving the production of the batteries to Korea makes perfect business sense in that the cost of production will only be a fraction of what it would cost to produce in the USA, however making such a large financial commitment with tax payer money is a risky decision on GM's part. The check has not even cleared the account and the money is already spent.

Most old timers love contracts because it ensures job security, therefore GM probably signed a $10million 5year contract with LG to keep his name on the books. The only way to save GM would be to cut off its money supply and force it to restructure under Chapter 11. FIRE WAGONER!!! and start over under 21st century management.

They need innovators that will revolutionize the brand and create a new image. When was the last time you heard someone say they love their NEW chevy?? The company has lost their edge and the american customer. If it was not for the sheer volume of middle america and its international sales keeping it afloat, the company would be in a substantially worse situation. Let capitalism take its course and make room for the next generation...

[ArthurGlen]

Obviously Ken Bensinger isn't aware that the winnning company (LG Chem) is actually a US corporation, and that the losing team was based in Germany. Or that the losing team also produces its batteries in Asia. ken
ain't too bright - certainly he needs to get a whole lot more informed before writing fictitious stuff like this.
GM also chose the best technology, something that Ken has in the past criticized GM for not doing. Ken is simply not competent to author anything about cars, batteries, electricity, or foreign versus domestic.

[Peter]

Outrageous! Beg for loans/bailouts, then once again do the *wrong* thing and buy imported stuff because it is 'cheaper'. Sadly GM fails once again to consider the big picture.

GM: the WalMart of cars now.

[Phil Colley]

I'm with GM Communications and I’d like to clarify a few misconceptions by Ken and others in this thread.

First, we would have made this announcement without the bridge loan because our focus is to put capital behind the highest priority programs, which includes the Chevy Volt. The loan is being used exclusively to sustain and restructure our operations in the United States and aggressively retool our product mix. As with all automotive products built in the U.S., GM and other automakers source components from around the globe. In our case, 92 percent of parts and components for our U.S.-built cars and trucks come from the U.S. and other North American sources. The LG Chem cells are just one component that will be used in the Volt battery assembled by U.S. workers in Michigan.

Second, we made a balanced decision based on performance, production readiness, vehicle integration, efficiency and durability when selecting LG Chem. Independent tests have verified that their cell chemistry can achieve greater than 15 years of calendar life in an automotive environment through accelerated testing. Plus, they demonstrated superior manufacturing readiness for prismatic cells to meet our program timing.

Finally, with this strategic direction, GM is adding to the U.S. workforce, rather than reducing it. We will also continue to work with A123Systems and other battery suppliers on development projects because we have many needs that need to be met with our broad portfolio of hybrid-electric and extended-range electric vehicles.

And by the way Ryan, I love my new Chevy HHR SS and would love it even if I didn’t work for General Motors.