GM Throws A123 From a Moving (Hybrid) Car

I'd missed this news from last week's North American International Auto Show, until an eagle-eyed reader called my attention to it: GM has chosen Korean-made batteries from LG Chem, instead of batteries from A123 Systems of Watertown, Mass., for the first generation of its Chevy Volt plug-in hybrid.

From the AP:

LG Chem CEO Peter Kim said the company may eventually build cells in Michigan, and it anticipates that its U.S. subsidiary, Compact Power Inc., will add to its 100-person work force in Troy, Mich.

...{Volt vehicle line director Tony] Posawatz said GM chose LG Chem because of its flat-cell design that dissipates heat better and stores more energy than competitors' cylinder-shaped cells.
The competition from A123 Systems Inc. of Watertown, Mass., was very capable, Posawatz said, but "one has to be the lead."

The Christian Science Monitor offers more detail on the decision, in this Q&A with Robert Kruse, a GM executive director for hybrid vehicles. Kruse says:

"...We selected LG as the cell source for Gen-one Volt; and we are also very intrigued and attracted to some of what A123 has to offer and are continuing to do advanced development with A123 for future applications – just not Gen-one Volt.

The Oakland Business Review has an interesting quote from GM vice chairman Robert 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," he said.

John Dodge of Design News asks some interesting questions:

– GM may have bought itself a problem, too. It has taxpayer loans now and despite all its plans to build battery labs and plants in Michigan and around the world, it can’t escape that fact it selected a Korean and not an American company to make the key component for its batteries. Could this be a problem for the incoming president whose number one priority is getting Americans back to work?

– What did A-123 know when did they know it? Could its executives have been thinking on Jan. 7 [when they applied for a $1.84 billion government loan to build a new plant] that it was going to be GM’s key battery partner? Was the announcement a Hail Mary pass to convince GM that it would have the manufacturing prowess and capability to operate in the giant auto maker’s back yard? Did GM chose LG Chem in the 11th hour?

Ecogeek has more analysis.

No comments in the media from A123, which filed for an IPO last August so the company is still stuck in its quiet period.

Think that public offering will be happening soon?

Most recent Globe column: The A123 Systems Back-Story

My most recent Globe column delves into the back-story of A123 Systems, the Watertown battery company that is smack in the middle of the plug-in hybrid frenzy, and apparently preparing to go public (though one might ask what's taking them so long with the S-1?)

Here's the opening:

The third time that Ric Fulop asked Howard Anderson to invest in one of his start-ups, there was no good reason for Anderson to say yes. Fulop was forming a company that would reinvent the battery, but Anderson, founder of the Boston forecasting firm the Yankee Group, had already lost millions by investing in Fulop's previous ventures.
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Fulop had come to the United States from Venezuela, where he'd started two companies while still in his teens, and then dropped out of Babson College to dive head-first into the entrepreneurial mosh pit of the late 1990s.

He started a company to stream software to PCs. He started a company to make equipment that would increase the bandwidth of high-speed Internet connections. A third start-up, Broadband2Wireless, aimed to use a network of antennas on rooftops to bring a zippier Internet access alternative to big cities.

The three companies, which together sucked up more than $100 million in funding, all failed. Broadband2Wireless, which filed for Chapter 11 protection about a year after its founding, acquired the nickname "Broadband2Cashless."

I wrote about Broadband2Wireless here, in 2001. And I wrote about Anderson's exit from the VC world here, in 2005. (Can't seem to find the column that chronicled the death of B2W, but this one mentions the CEO's resignation.)

The weekly video for the column is here:

Demand for hybrids: It's hot

This weekend, I happened to be hunting for a used hybrid online... and finding almost nothing available within 100 miles of Cambridge. (Our one vehicle right now is a great Honda Civic Hybrid, which averages about 38 mpg.)

Today, Rob Weisman of the Globe has a great story about how the demand for new hybrids is also insane. From the piece:

"We can't get them in fast enough," said auto dealer Herb Chambers, owner of Herb Chambers Cos., based in Somerville. Chambers said hybrid orders are running ahead of last year at his Massachusetts and Rhode Island dealerships. "We could sell six or eight times as many Priuses if we could get the product from the manufacturer," he said.

Industry analysts attribute the backup to supply-chain problems. Manufacturers have finally deployed hybrid technology on a wider scale, but they have failed to create a global supplier and transport network that can get parts to assembly lines and vehicles to dealerships in time to satisfy consumers spooked by $4-a-gallon gas prices.

Here's a fun historical piece I wrote for Salon four years ago about why GM thought hybrids weren't worth investing in.

The A123 Systems IPO: Signed, Sealed ... But Not Yet Delivered

Two unnamed sources with close ties to A123 Systems, the Watertown maker of next-gen lithium ion batteries for Black and Decker cordless tools and plug-in hybrid cars, tell me that the company's IPO filing is essentially complete. Once the first quarter numbers are finalized, an S-1 is likely to arrive in the SEC's inbox sometime in the next month or so. The offering could value the company at more than $1 billion. Road show is planned for September; Goldman, JP Morgan, and Merrill are underwriting, I'm told.

A123 Systems has raised more than $150 million since it was founded in 2001. Among the biggest winners from a successful IPO would be North Bridge Venture Partners and Sycamore Networks chairman Desh Deshpande. (North Bridge has a cool video case study on A123.) Sequoia Capital and General Electric are also investors.

Will Wall Street have an appetite for a battery IPO in September? We'll see...

A123 Systems' PR rep, Keith Watson, says, "The company can't comment on anything related to an IPO."

(In the photo is George W. Bush with A123 CEO David Vieau, standing next to a plug-in hybrid Prius that A123's Hymotion division converted. White House photo by Paul Morse.)