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

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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

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