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December 09, 2019 12:37 PM

GM ‘de-risks' its electric vehicle plan with LG partnership

Hannah Lutz
Automotive News
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    General Motors Co.
    The 2020 Chevrolet Bolt electric vehicle uses batteries supplied by LG Chem. LG and GM are partners in a new battery factory planned for Lordstown, Ohio.

    Detroit — As General Motors Co. pushes toward an electric future, it's softening the risk of plunging into an uncertain market by getting a partner to shoulder half the investment it needs in battery manufacturing.

    Through a joint venture, GM and LG Chem of South Korea are planning a $2.3 billion lithium ion battery-cell plant in northeastern Ohio, near the defunct Lordstown Assembly plant.

    By building one of the world's largest battery plants — though it will employ fewer workers than Lordstown Assembly did — GM aims to reduce the cost of building electric vehicles, achieve industry-leading cost levels and make EVs more affordable. The automaker believes that, in turn, can accelerate demand and ensure its other multibillion-dollar investments in EVs pay off.

    "What you're hearing from General Motors is a commitment to electric vehicles and to solving customer issues so we can drive adoption," GM CEO Mary Barra told reporters. "And partnering with LG Chem that has tremendous expertise and capability is something that … de-risks the plan."

    In the past two months alone, GM has pledged more than $4 billion toward EV manufacturing. It's spending $3 billion to build electric trucks and battery modules at its Detroit-Hamtramck Assembly plant.

    That's despite most experts' beliefs that consumers will continue to buy mostly internal-combustion vehicles for at least another decade.

    The Ohio plant will have an initial annual capacity of more than 30 gigawatt-hours. Tesla said its Gigafactory 1 in Nevada was the highest-volume operation in the world when it reached an annualized rate of 20 gigawatt-hours in mid-2018.

    The battery cells from the Ohio plant will be used in GM's future EVs, including an electric pickup scheduled for release in the fall of 2021. GM has said it plans to introduce 20 EVs globally through 2023 and to sell 1 million EVs annually as of 2026.

    The company is wagering billions even as battery-electric vehicle sales make up only 1.7 percent of the U.S. market in 2019, according to J.D. Power sales data through October, up from 1.3 percent a year earlier.

     

    The 50-50 joint venture between GM and LG Chem aims to create 1,100 jobs in the Lordstown area, about one-third as many as GM has eliminated there since 2017. GM and LG Chem plan to start building the plant in mid-2020 on an undisclosed greenfield manufacturing site.

    GM couldn't just retool Lordstown Assembly for battery manufacturing because it needed a different type of facility, Barra said.

    Instead, GM sold the plant last month to Lordstown Motors Corp., a new company affiliated with Ohio-based EV maker Workhorse Group that plans to build electric pickups for commercial customers. The majority of GM's former Lordstown workers have transferred to other GM plants.

    LG Chem, the battery supplier for the Chevrolet Bolt, operates an EV battery plant in Michigan. It also has factories in South Korea, China and Poland.

    Going from a supplier relationship to a joint venture will better position GM to "win in the electric vehicle space," Barra said. "I see this as a critical juncture in our goal and our path to create an all-electric future."

    EVs have to be affordable, profitable and convenient, and they have to have the right range, she added.

    LG Chem brings the chemistry and battery cell know-how, while GM has high-volume manufacturing expertise, Shilpan Amin, whom GM promoted last month to vice president of purchasing and supply chain, told Automotive News.

    "In this evolution of technology, we've got to jointly figure out how do we become the most efficient at spending our resources to enable the technology to come to the table," Amin said. "This is one demonstration of the path we're on and the value of those relationships we have with our suppliers."

    There's familiarity between GM and LG Chem. Denise Gray, CEO of LG Chem's North American subsidiary, spent three decades at GM. She led its efforts to develop battery technology for the Chevy Volt.

    Last month, before the joint venture was announced, Gray noted a change in the undercurrents of the auto industry's need for batteries, one that has seen a shift from projected to realized demand.

    "We're into that segment of time where the demand is there from our customers, and they're assuming that their customers are actually going to buy these vehicles," she told Automotive News. "So we've seen a step-change in demand, which means we have to work extremely fast, hard, effective, in designing batteries and also building the capacity around the world to be able to meet that demand."

    Pete Bigelow contributed to this report.

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