Stimulus-aided production of batteries is revving up

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WASHINGTON --- The first wave of mass-produced advanced batteries funded by the Obama administration's economic recovery program are starting to roll off assembly lines, setting the stage for new hybrid and electric vehicles.

An A123 Systems Inc. logo is seen in Livonia, Mich. in this photo taken Thursday, Aug. 6, 2010, The first wave of mass-produced advanced batteries funded by the Obama administration's recovery program are starting to roll off assembly lines, setting the stage for new hybrid and electric vehicles. The question remains: How will consumers respond?  Paul Sancya/Associated Press
Paul Sancya/Associated Press
An A123 Systems Inc. logo is seen in Livonia, Mich. in this photo taken Thursday, Aug. 6, 2010, The first wave of mass-produced advanced batteries funded by the Obama administration's recovery program are starting to roll off assembly lines, setting the stage for new hybrid and electric vehicles. The question remains: How will consumers respond?

So how will consumers respond?

Fending off criticism of the $787 billion stimulus program, the administration has cited the battery industry as one of the success stories.

Battery maker A123 Systems Inc. planned to open a new lithium ion battery plant today in Livonia, Mich. About 300 workers, many laid-off auto workers, were to join Energy Secretary Steven Chu and Michigan lawmakers to promote their production of battery cells and components. The Watertown, Mass., company received $249 million in stimulus money.

Last week, automotive supplier Johnson Controls Inc. started shipping batteries made at a Holland, Mich., facility built with the help of $299 million in federal grants. The factory expects to employ 90 workers by late next year and could produce 75,000 to 150,000 batteries a year, depending on the mix of hybrid and electric vehicles it supplies.

The Energy Department estimates that the 48 projects announced last year under the $2.4 billion program could lead to the production of about 75,000 batteries by next year and 500,000 batteries annually by 2014. Michigan, Indiana, Ohio and South Carolina are the states with the largest share of the projects.

Despite the fanfare, the battery industry faces many hurdles. Gas-electric hybrid vehicles represent about 1 percent of new vehicle sales, and many plug-in hybrids and battery electric cars are just entering the market.

Costs are high. The government has estimated that a battery with a 100-mile range costs about $33,000, although it says stimulus money could bring that down to $10,000 by the end of 2015.

The federal money has raised questions about whether the projects could create more capacity than will be met with demand for the vehicles.

Mary Ann Wright, a Johnson Controls vice president, said too much capacity could be created in the short term. But she said the administration was working on tax policies to encourage vehicle sales and directing government to adopt the technology.

"The rapid buildup of production capacity by companies with limited experience for product with challenging market may prove wasteful," said Menahem Anderman, the founder and president of Total Battery Consulting, a California firm.

Anderman said by e-mail that if the factories are profitable and running at full capacity by 2013-14, Obama officials will be able to claim success. "Unfortunately that scenario is pretty unlikely."

Matthew Rogers, an Energy Department senior adviser who has overseen the battery grants, said the administration was confident that the demand for the vehicles will keep the factories operating. "The prices of these batteries are coming down faster than we expected," he said.


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