High Voltage: $1.7 Billion for Michigan Batteries

Will the new name for Detroit be Battery City? The state of Michigan is shaping up as a global center of lithium-ion battery manufacture, thanks to a $1.7 billion deal announced April 14 involving no less than four world-class battery companies. The four are: · Massachusetts-based A123, which will expand operations in Ann Arbor and Novi, Michigan, as well as build a new 300,000-square-foot $600 million facility (employing 5,000 people) in Livonia (in southeast Michigan near Detroit). · KD Advanced Battery Group, a joint venture between Dow Chemical, Kokam America and Townsend Ventures, which will build a $665 million, 800,000-square-foot battery plant to equip EVs and hybrids. · Korea's LG Chem and its Troy, Michigan subsidiary Compact Power, which (with General Motors) will spend $244 million on a 660,000-square foot facility to build li-ion batteries for the Chevy Volt and other green cars. This U.S. expansion could quiet criticism of GM for partnering with a foreign battery company. · Johnson Controls-Saft Advanced Power Solutions of Milwaukee, which will put 498 workers in place to staff a $220 million advanced battery plant to supply, among others, Ford's forthcoming plug-in hybrid.

A123 CEO David Vieau was reached in his car following the Lansing press conference announcing the large-scale battery deal with Michigan Governor Jennifer Granholm. He said the company is securing $100 million in refundable state tax credits for the factory project, which will be online by 2010. "This announcement ensures that Michigan will be a key capital of the battery industry," Vieau said.

A123 recently announced a partnership with Chrysler's ENVI division to supply batteries for its soon-to-be-announced EV (one of five prototypes). A123 is the battery supplier for 19 electric and hybrid vehicles from several manufacturers, including China's Shanghai Automotive Industry Corporation (makers of China's first hybrid car).

The Ann Arbor facility is an advanced R&D center, and Novi hosts A123's automotive engineering team. A123 is currently making batteries in Massachusetts, but with the capacity to make only 10,000 a year. A123 is also applying for $1.8 billion from the Department of Energy's $25 billion vehicle and battery manufacturing program (plus stimulus money), and the company's long-term goal is to be able to make 500,000 cells and packs annually, Vieau said.

These projects should bring li-ion batteries to the mass market, begging the question: Will volume will bring down what are currently daunting costs? A battery pack for a plug-in car can be $10,000 to $15,000--making it a challenge to get a vehicle on the market for less than $30,000. "Take a look at the paradigm of falling prices for flat panel televisions," said Vieau. "I believe volume increases will lead to a similar price reduction for batteries."