January 7, 2009 - A123 Systems, Watertown MA

Battery maker A123 Systems to bring jobs to southeast Michigan

Detroit automakers' hybrid plans will benefit from plant

A Massachusetts battery designer said Wednesday it plans to build a manufacturing plant in southeast Michigan to supply batteries for Detroit automakers.

A123 Systems says the plant will be the first of several across the country that could eventually employ 14,000 people and supply batteries for 5 million hybrid vehicles or 500,000 plug-in hybrids by 2013. The company says it will spend $2.3 billion on the factories, and has applied for $1.8 billion in federal loans under the $25-billion advanced technology program that Congress funded last year.

While automakers around the world have been planning to use lithium-ion batteries in future hybrids and all-electric vehicles, most of the world’s manufacturing of such batteries is in Asia. Only one firm, Enerdel, currently builds lithium-ion vehicle batteries in the United States.

President-elect Barack Obama and key members of his administration have pointed to plug-in hybrids and electric vehicles as one of the technologies they want to see automakers press for to reduce U.S. dependence on foreign oil. American automakers and policymakers have been concerned that without domestic production of lithium batteries, the United States would be dependent on foreign firms or last in line for any available supply.

David Vieau, A123Systems president and chief executive officer, said in a statement that the new plants will “help ensure that the American economy replaces its dependence on foreign oil with reliance on advanced, homegrown batteries.”

A spokesman for A123 was unable to say how many jobs might be created at the Michigan plant, or how many plants the company plans to construct and where.

General Motors Corp. and Chrysler LLC have been evaluating A123’s lithium-ion battery designs for use in their electric vehicles, including the Chevrolet Volt. Chrysler said A123 was a "key supplier" for its ENVI electric vehicle projects, the first of which are supposed to go into production in 2010.

“Chrysler strongly encourages the efforts of A123 Systems to develop and mass produce energy storage systems in the United States” said Lou Rhodes, Chrysler's vice president of advanced engineering.

GM has not said which company would be chosen to supply batteries for the Volt; A123 and German parts maker Continental AG have been competing against South Korean battery maker LG Chem and Troy-based Compact Power Inc. for the contract. But GM officials have been among the most vocal in pushing for domestic battery production.

“A123's proposal to manufacture advanced battery cells and packs right here in the United States is a positive development for our industry and the nation,” said GM Vice Chairman Bob Lutz.

A123 says it's working with seven automakers.

Last month, Michigan lawmakers approved tax credits worth up to $335 million for battery firms to build manufacturing plans here, depending on how many battery packs are assembled in the state, production expenses and other factors.

Michigan economic development officials were hugely pleased with the announcement.

“Oh, man, I tell you what, this is just absolutely wonderful news. There’s a new industry being born here in Michigan,” said Ken Rogers, executive director of the Troy-based Automation Alley, a nonprofit economic development agency.

Automation Alley was one of the organizations that lobbied for legislation to create incentives for battery makers to operate in Michigan.

“It’s the future of the auto business. It’s the electrification of automobiles,” Rogers said. “We’ve got the workforce that fits it like a glove and we’ve got an auto industry that’s crying for these batteries. What a marriage!”

In November, the Michigan Strategic Fund, an arm of the state’s economic development efforts, approved $10 million in funding for A123’s new plant expansion in Michigan under the fund’s Centers of Energy Excellence program.

A123 currently operates an office in Ann Arbor, and partners with both the University of Michigan and Michigan State University. Under the terms of the state grant, both U-M and MSU will get a small portion of the state funding to conduct research for A123.

U-M will research manufacturing system design, performance and processes. MSU will research battery materials and electrode design.

In addition, the U.S. Department of Energy will provide $27 million in matching funds for A123, although it was not clear how much of that money would be spent in Michigan.

In addition to funding federal loans, Congress and the Bush administration also agreed last year to pay for tax credits of up to $7,500 for every plug-in hybrid or electric vehicle.

Original Story - Detroit Free Press

A123 Press Release

A123Systems today announced it has submitted an application under the U.S. Department of Energy’s Advanced Technology Vehicles Manufacturing Incentive Program to qualify for $1.84 billion in direct loans to support the construction of new world-class lithium ion battery manufacturing facilities in the United States, with the first construction location in southeast Michigan.

If A123’s application is approved, this program would enable the company to dramatically expand production capacity in the United States, with full production volumes designed to supply battery systems for five million hybrid vehicles or half a million plug-in electric vehicles per year by 2013.

"We’re entering an exciting new phase for the automotive industry where we increase the electrification of vehicles, reducing consumption of gasoline through advanced batteries. This new facility would greatly accelerate this change and help ensure that the American economy replaces its dependence on foreign oil with reliance on advanced, homegrown batteries,” said David Vieau, A123Systems President and Chief Executive Officer.

At full operation, A123 expects the combined plants would occupy as much as 7 million square feet and create over 14,000 jobs. These plants would produce battery cells and systems to meet the needs of A123’s broad automotive customer portfolio, which currently includes over seven vehicle manufacturers and 19 vehicle models ranging from HEVs (hybrid electric vehicles) to EVs (electric vehicles).

“Chrysler’s commitment to E-drive industry leadership has led us to a strategic relationship with US-based A123Systems as one of our key suppliers supporting production development of ENVI electric vehicles. Chrysler strongly encourages the efforts of A123Systems to develop and mass produce energy storage systems in the United States” said Lou Rhodes, VP of Advanced Engineering for Chrysler LLC and President of ENVI.

"At GM, we see the development of vehicles powered by electricity as key to the transformation of our industry. And advanced battery technology, is at the heart of this transformation," said Bob Lutz, GM Vice Chairman of Global Product Development. "A123's proposal to manufacture advanced battery cells and packs right here in the United States is a positive development for our industry and the nation."

“At Project Better Place, we truly believe that there is a path forward for the US to lead the world into a 21st sustainable century led by American innovation. Converting our national fleet of cars from fossil fuel dependent to fully electric revives our core industrial power, addresses key national strategic goals, and starts to address the biggest global risk we have – climate change. It represents a historic opportunity for the US to re-engineer its economy and its global reputation. We look forward to leading the transformation to sustainable mobility with partners like A123 as part of our mission to end the world’s addiction to foreign oil,” said Shai Agassi, Founder and CEO of Better Place.

A123 was born out of the research labs of the Massachusetts Institute of Technology and was funded initially with a $100,000 grant from the U.S. Department of Energy in 2001. Existing A123 customers include AES, BAE Systems, Black and Decker, Cessna, Chrysler LLC, General Motors, Project Better Place, and Th!nk.

Support for A123’s US battery plant plans is broad and spans the following:

Michigan State Government

“This plant will be a showcase to our economic turnaround in Michigan. We look forward to working with A123Systems to support their growth in our state,” said Michigan State Governor, Jennifer Granholm.

Senator Kerry

"The new Administration has a great opportunity to insure that a superior American technology originally developed by A123 out of MIT, leads the way to an electric transportation revolution. This is a way to produce tens of thousands of new jobs and millions of oil-free new cars right here in the United States. I look forward to the plant that will be based in Massachusetts as part of the fight we’ll lead to guarantee that the electric fuel of the future will be sourced right here at home instead of overseas," said Senator John Kerry.

Senator Stabenow

“We need a 21st century manufacturing strategy in this country to ensure that the research and production of advanced energy technologies are taking place here at home,” said Senator Debbie Stabenow. “Companies, like A123, are not only creating quality, good-paying jobs in Michigan, but are ensuring that we do not move from a dependence on foreign oil, to a dependence on foreign technology.”

Senator Levin

“The prospect for a new advanced battery production facility in Michigan is exactly the kind of hope that our state needs as we work through a deep economic downturn. Domestic production of American developed battery technology is a key step towards enabling the transformation of the automotive industry to produce greener and more efficient vehicles,” said Senator Carl Levin.

Congressman Markey

“Advanced lithium ion batteries used in hybrid and electric vehicles will be a driving force in strengthening our economy and fighting global warming. We support the efforts of A123Systems and the American battery industry to establish a robust North American mass production base, which will make the U.S. a leader in our clean energy innovation future,” said Congressman Ed Markey.

Congressman Dingell

“I am extremely excited about A123System’s plan to build a battery manufacturing facility in Michigan, home to the most talented workers in the world. The future of this country is dependent upon addressing two vital challenges – stopping the spread of global warming and creating the next generation of manufacturing jobs here in the United States. This project gets us closer to achieving both of these goals,” said Congressman John Dingell.

About A123Systems

A123Systems develops and manufactures advanced lithium-ion batteries and battery systems for the transportation, electric grid services and portable power markets. Founded in 2001 and headquartered in Massachusetts, A123 Systems’ proprietary nanoscale electrode technology is built on initial developments from the Massachusetts Institute of Technology. For additional information please visit www.a123systems.com.

Press Release

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.

Updated Story - LA Times