Monday, April 06, 2009

A123 Systems to Build Batteries in Michigan for Chrysler... and Maybe China, Too

You may remember that back in January, A123 Systems had received a Center of Energy Excellence designation in Michigan for their partnership with the U of M and MSU on producing advanced battery technology, and they announced plans to build two facilities to manufacture batteries for electric vehicles. Today, it was announced that they signed an agreement and will supply the batteries for five electric cars in the Chrysler line-up, assuming that Chrysler will still exist in some form or another.

Under the agreement announced today, A123 will build a plant in Michigan to manufacture its nanophosphate lithium ion battery cells, which can be combined into battery packs large or small enough to suit the size of each vehicle. Using the same battery cells in all of its upcoming electric-drive vehicles, Chrysler says, will reduce development time and system costs and help increase production volumes. The cells will end up inside the company’s so-called “ENVI” line, which includes the Dodge Circuit EV, the Jeep Wrangler EV, the Jeep Patriot EV, the Chrysler Town & Country EV, and the Chrysler 200C EV concept car.

This should help Chrysler become a more attractive bet to save, either with a partnership with Fiat, or any of the other plans being floated out there. Time will tell. And hey, if that doesn't work, we can always sell them to China.

Score one, for the home team. Buyers of a new hybrid to be built and marketed in China by one of that country's largest automakers apparently will see "Made in the USA" stamped on several key components.

The Wall Street Journal is reporting that SAIC (Shanghai Automotive Industry Corp.) plans to use batteries from Massachusetts-based A213 Systems and electric motors and power controllers from Michigan-based Delphi Corp.

The companies involved haven't announced a deal -- the WSJ piece is based on comments from unidentified sources -- but it makes sense as SAIC already partners with both General Motors and Volkswagen to build various of their cars that are sold in China and other Asian markets, and is responsible for integrating Delphi and A123 Systems components into GM hybrids, the newspaper reported.

China is making a push for electric and hybrid cars so they can reduce dependence on oil and clean up the air. Sounds familiar...

A123 has plans for two plants that will create up to 14,000 jobs, the first in Michigan, unclear where the second one would be at this point - but legislation signed today might help them make up their minds. We are upping the ante on credits so we can make an even bigger push for the federal grants made available by the Recovery Act. Talk about being in the right place at the right time...

The new law adds an additional $220 million in refundable tax credits for companies involved in the development and application of advanced-battery research, engineering, and manufacturing. The legislation expands the $335 million in tax credits that Governor Granholm signed in January, which were the first in the nation, bringing total incentives available to $555 million. The legislation signed today:

• adds an additional $220 million in tax credits to the $335 million approved in January;

• increases from $70 million to $90 million the maximum amount of tax credits for companies engaged in vehicle engineering to support battery integration, prototyping and launch expenses;

• allows the Michigan Economic Growth Authority (MEGA) to approve up to $300 million of the total $555 million in incentives for the construction of battery-cell manufacturing facilities.

Have a good thought for Chrysler. If this all works out, we could be the center of battery manufacturing... for the entire world.