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Summary:

Battery startup A123Systems was on a roll in 2008: It went into the year with a fresh round of capital (funds totaled $132 million in October 2007) and by May seemed to be headed for an IPO. But less than two weeks into 2009, the Massachusetts-based […]

cpi-lipolymerBattery startup A123Systems was on a roll in 2008: It went into the year with a fresh round of capital (funds totaled $132 million in October 2007) and by May seemed to be headed for an IPO. But less than two weeks into 2009, the Massachusetts-based company has been defeated in a battle for what could be (if the automaker stays afloat) one of the biggest electric-vehicle battery supply deals in the country: GM’s Chevy Volt.

Granted, GM has said it will continue working with A123 (and other battery makers) “to support several [battery] companies and technologies.” But why did A123 lose out to LG Chem’s Compact Power for the major deal? According to GM vice chairman Bob Lutz, the automaker wanted flat, lithium-ion. The risks involved with working with a startup also played a factor.

The Michigan Business Review reports this explanation from Lutz:

A123 is still sort of a startup, they’re still ramping up, and A123 has been specializing mostly in…cylindrical cells, which are good with power tools and stuff. What we need here is prismatic, which is flat cells. And LG Chem is just farther along.

phev_cell_a1231The question of flat vs. cylindrical lithium cells came up last week when Apple unveiled its new 17-inch MacBook Pro at the annual Macworld Expo in San Francisco. Apple’s move to the flat side stems from the company’s design interests (the computer is less than an inch thick, so the lower the battery’s profile, the better). GM has similar reasons: Prismatic designs allow for higher density of cells in lower-volume battery packs (read: more trunk space).

As for the decision to go with the more established company, it represents a safe (and in this economy, smart) move for GM. The little Volt carried much of the weight of GM’s pitch to Congress for bailout funds, and it would be a risky bet to rely on a startup that itself needs government aid to build out manufacturing facilities.

Lutz added a jab at U.S. policymakers for failing to support energy storage technology R&D at the level of counterparts in South Korea (where LG Chem has it’s headquarters) and Japan (the world’s EV and laptop battery heavyweight). Again, as reported by the Michigan Business Review:

This is one of the things why we say, if we’re serious about the electrification of the automobile, as part of the national energy policy we do need government support for advanced battery development, which of course Japan has. LG Chem has massive support from the Korean government in terms of a whole research campus was paid for by the Korean government because Korea recognizes that advanced battery technology is a key component of the country’s competitiveness.”

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  1. Since GM is on it’s Deathbed, it suspect the price they offered A123 was pathetic.

  2. Environmental Capital – WSJ.com : Green Ink: Oil Falls, Pickens Stalls Tuesday, January 13, 2009

    [...] Just as software beat hardware to become the key to computing, batteries will be the future of the automotive industry, argues the L.A. Times. Which could be why GM will build its electric-car batteries in-house, in the WaPo. That’s bad news for A123, which was vying for the GM battery deal, at Greentech Media and Earth2Tech. [...]

  3. GM to Spend $30M on Volt Battery Assembly Plant « Earth2Tech Tuesday, January 20, 2009

    [...] Korea’s LG Chem (s LGCL Y). The facility is just the latest development in a race between A123Systems, which lost the Chevy Volt cells deal, and GM to create a large-scale lithium-ion battery plant in [...]

  4. Problem is that LG uses a different chemistry for their cathodes. This chemistry is not nearly as reliable or safe as the Fe-phosphate materials that A123 uses.

  5. A123Systems: Dissed by GM, Scores Battery Deal with Chrysler Monday, April 6, 2009

    [...] Today’s announcement highlights differences in the strategies at Chrysler and General Motors as the two automakers endeavor to show progress on cleaner cars. A123 plans to build a plant in Michigan to make modules and battery packs for Chrysler’s vehicles using prismatic (as opposed to cylindrical) lithium-ion cells — a technology with which GM decided the startup had yet to gain much experience, as we explained in our post about why A123 lost the Volt battery deal. [...]

  6. Battery Maker A123Systems Charges Up With $69M Monday, April 13, 2009

    [...] A123Systems looks like it’s making its way through the haze of the downturn, despite that lost deal to supply batteries to GM’s ( s GM) Volt and a stalled IPO. The good news started last week when the lithium ion battery maker announced a [...]

  7. Obama MPG Proposal Raises Stakes for Green Car Tech Tuesday, May 19, 2009

    [...] LG Chem over runner-up A123Systems as the supplier for its Chevy Volt battery cells in part to avoid the risk that comes with working with a young [...]

  8. A123 SYSTEMS « My Blog Tuesday, June 23, 2009

    [...] that advanced battery technology is a key component of the country’s competitiveness.” http://earth2tech.com/2009/01/12/why-a123systems-lost-the-volt-battery-deal/ Car battery maker A123 scores $15M more from GE Camille Ricketts | April 13th, 2009 A123 Systems, [...]

  9. A123Systems Takes a Post-Stimulus & Bailout Look at IPO Tuesday, June 30, 2009

    [...] in recent months, another important shift has taken place. Whereas A123 in November touted its relationship with General Motors as a point of strength — an example of its “industry-leading partners in focused [...]

  10. Tipping Point: A123Systems’ Road to the Battery Slam Dunk Thursday, August 6, 2009

    [...] than a year after startup A123Systems lost a battle for what could be one of the biggest plug-in vehicle battery supply deals in the country — [...]

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