The Toyota Prius was a game changer. The first popular hybrid in the U.S. essentially stole a march from American, German and Korean automakers. Sure its 40 to 45 miles to the gallon wasn’t revolutionary and it only captured about 2% of the U.S. car market, but it proved the commercial viability of hybrids thus pointing the way to the future.
GM has been feverishly working on their answer — the Chevy Volt. At the heart of Detroit’s shot at the moon is the Volt’s battery technology, which will be critical in determining the car’s success. There is just one problem. There are virtually no high-tech American battery companies.
A start-up American battery company, A123Systems, has been working with GM for years, but as a start-up, they currently do all their major manufacturing in China. Furthermore, A123Systems’ biggest customer is Black and Decker, for whom they make cylindrical cells, a technology that’s fine for power tools, but poorly suited for cars.
Without any domestic battery manufacturers up to the task, GM announced yesterday at the Detroit Auto Show that they have selected LG Chem as their main battery cell supplier. At the end of the day, Detroit executives cited the fact that LG had its own factories and much greater experience in building battery cells than A123Systems. There is quite a bit of noise in the U.S. blogosphere of the irony that an American hybrid car will have Korean batteries, but for GM it was purely a business decision.
One other thing Detroit executives said. LG got a lot of Korean government money to develop battery technology and that’s how they got the GM contract. These same executives are telling Congress that the U.S. auto industry can also use “similar” government support. Well, appears that Detroit is not only asking the government for a bail-out, but that it also doubles down on the industry.
Update: According to the KT, the LG/GM deal should be worth $1.5 billion (two trillion won) over the next 5 years.
{ 33 comments… read them below or add one }
When I read this I wondered if this may become part of a trade issue with Korea. Something like “We buy your batteries, you buy our cars”, but less brutish. It will be interesting to see how Obama works this theme into negotiations with Korea.
Meanwhile as far as the public-private partnership, it’s been suggested for years. Remember the talk about how we had to be more like the Japanese in the late 80′s and early 90′s? Anybody for the close public-private relationship Korea had that lead to credit crisis in the late 90s? Yeah, really look forward to that fight since we have proof how f-ed that make your economy.
If such comes to pass I hope Congress tells the big three to stick it up their tailpipe.
same as with the Genesis article, in the US, white Americans are “thinking out loud”
How can this be?
something from ‘Korea’ is better than what we make in the States.
obviously a subconsious bit of racism/superiority complex.
I doubt they’d be that shocked if Czech Republic came out with a better air fighter jet, hypothetically right now versus the Raptor.
Just sayin’.
Because you know I’m right.
In our globalized, flattened world (flattened in the Thomas Friedman of the NYT’s sense) it is unrealistic to expect a finished product, whether it is a dvd player or a car to have all components of a single country origin.
When something is “Made in X”, X is defined by the country where the final product was last assembled.
Even if the Chevy Colt has a Korean-made battery….and a German transmission, a Mexican engine plant, and Canadian windshield wipers, if it’s assembled in Michigan, then it is an American car. Furthermore, assembly of a car produces far more jobs than the manufacture of any one single component, such as batteries.
So the deal is a win-win situation. Good for Korea and good for the US.
Actually, wjk, I don’t know that you’re right – but I don’t know that you’re wrong. Separating the wheat from the chaff in your comments is a mighty tiresome job. I know I have a difficult time with it because you seem to throw everything (see yours above for racism, technology and suspect conclusions), a lot of which has nothing to do with the subject at hand.
And you still haven’t addressed that hangup with the Mets. Still pissed that Randolph was fired? Hey, it happens.
WJK, to lump automobile manufacturing with Aerospace proves you are thinking and talking out your ass.
I’m suprised that there isn’t more discussion on this. This is probably the biggest bit of U.S/South Korea related news since the beef protests.
As the world moves more into plug in cars, battery technology will be HUGE I mean HUGE. A big chunk of the Volt’s price will be the freak’in battery, which is why hybrids are as expensive as they are. Windfall for LG Chem… lost opportunity for American battery makers and Continental AG (German auto parts mfg that was also in the bidding).
LG Chem as the supplier of the heart of the battery system for the Volt is certainly a stop gap measure for the time being. GM is going to pour money (via U.S. tax dollars thank you very much) into battery manufacturing and R&D and still keep it’s relationship with A123Systems. GM will also build the housing case for the battery (not a high-tech product mind you) and do assembly operations in Michigan. But the heart of the system, the most difficult to manufacture and the part requiring the most technology, are the battery cells and that will be made by LG.
At any rate, the U.S. MUST develop their own battery technology. The Koreans, Chinese and Japanese have already put in significant resources (both government and non-government) into this. The future apparently points to less useage of gasoline and more useage of another power source and using batteries to store that power inside a car. If the U.S. does not develop key technologies in this field, it will just replace a dependence on Middle Eastern oil for East Asian batteries.
Perfect quote from the L.A. Times that underlies the problem:
Lighter, more powerful and more compact batteries are a strategic technology that the U.S. cannot afford to fall behind on.
I realize we’re talking about wjk here (for whom the usual standards of accuracy and cogency are waived) but NONE of the uproar about this involves racial issues or “subconsious (sic) bit of racism/superiority complex”.
Wrong again!
WK,
Because there is no opportunity to mock and belittle Koreans (preferably with ridiculous pictures) in this piece of news, I’m totally unsurprised that there isn’t more discussion on this.
TK,
I don’t attribute it to that… I attribute it to American’s general lack of interest (including those Americans that are familiar with Korea) in global strategic thinking to challenges not named Nazi Germany or the Soviet Union (or “radical” Islam)…
The race to develop better batteries is a “Sputnik Moment” it’s just that most Americans don’t realize it [yet]…
#7 AAK!,
No, in this case, if there’s any belittling to do, it seems that we ‘Merkins should be the target. We would have one of the largest needs for them (due to our population and relative wealth) yet have the least development in them – typical case of headupthearseas, but it’s nothing we cannot overcome if we set our minds and wills to it.
WK – You just quoted in comment 5 a GM guy who is concerned about critical battery issues, undermining your contention in comment 8. And surely you can do better than Nazi Germany or the USSR.
And the Korean: That’s LAME (#6)! Uncontroversial business stories seldom draw comments in the double digits.
Slim,
The two comments do not contradict each other. If it appears to, than let me clarify.
It’s one thing that an Engineer at GM understands the problem however, it’s definitely quite another if it’s only him and the management at GM who understand the problem.
However, my point is this… more than just the GM management has to see the problem here. If would help if a few Congressmen and their constitutes (i.e. the voting population, including people like me) would understand the urgency of this also. President Kennedy would never of been able to say that we’d send a man to the moon by the end of the 60′s unless the people of the U.S. was behind him no? It was a “Sputnik Moment” combined with the Cold War nature of the time that spurred the America to a sense of urgency.
Today? NO SENSE OF URGENCY… This is a global economy folks, fraught with opportunities yes, but also many DANGERS… Too many college kids in the states getting psychology degrees and MBAs and NOT engineering degrees. Too much reliance in having the rest of the world make everything instead of at least some important things domestically. Too much complacency in it being okay that other countries build and develop core new technologies. One commenter in some other blog said, “who cares who makes the battery… it’s better that it’s not made in the states… batteries are harmful for the environment to make.” What an ignorant and short sighted thing to say. I hope no Congressman shares those views!
Anyways, it just appears that no one in the general population seems to care… as if America has lost a bit of the frontier “hungry spirit” that made it great.
It is not true that America does not possess advanced battery technology for the automobile. Tesla Motors, which manufactures high performance electric powered sports cars, is a Silicon Valley based US company. That’s about as advanced as one can get in this technology. Tesla also design and build the batteries for their sports cars, ie. they don’t get it from elsewhere. Tesla Motors recently entered into a deal to provide batteries for Daimler’s mini smart cars.
The reason why these GM executives sound like hyperventilating chicken little’s about batteries being a do-or-die crucial tech and America not having this capability is because they want to scare Congress into giving them more bailout money. “Asians have this strategic tech and we don’t” might be a effective battle cry.
Too many college kids in the states getting psychology degrees and MBAs and NOT engineering degrees.
I have an engineering degree. It’s like a bootcamp for number crunching. The study of engineering kills creativity.
As of now, Asian countries may have competency in making batteries, memory chips, LCD screens and what have you but the future belongs to those who can integrate all those components and design an iPhone. Samsung can make all of the components that go into an iPhone. Yet, Samsung cannot come up with the iPhone itself.
One commenter in some other blog said, “who cares who makes the battery… it’s better that it’s not made in the states… batteries are harmful for the environment to make.” What an ignorant and short sighted thing to say. I hope no Congressman shares those views!
That is quite an ignorant thing to say. The whole reason battery-powered transportation is being pursued in the first place is to reduce one’s carbon footprint.
But this type of “ignorance” is also a business opportunity for disinterested observers. Environmentalism is growing into a big, faddish movement in the US. A car with a design, tech, and a carefully-crafted image that pushes all the right buttons in appealing to an eco-friendly ethos would do well with rich, liberal, urban elites.
The concept of the Urban Car has never been fully realized, with the possible exception of Europe and possibly Japan. The Urban Car is the complete 180 degree opposite of the gas-guzzling SUV. The Urban Car is the natural evolution of the automobile adapted to tight, crowded, stop-and-go traffic of urban environments, just as the SUV is (supposedly) the equivalent for rough terrain outdoors. It would be small, lean, electric-powered, efficient. It may even incorporate novel technology such as regenerative brakes and perpendicular parking. Toyota Prius and the Daimler Smart-car represent two examples of the industry’s current attempts at the Urban Car.
“The whole reason battery-powered transportation is being pursued in the first place is to reduce one’s carbon footprint.”
How does that happen exactly, are these batteries dug out of mines or self-charging or what? I thought you were an engineer there, BlueJives.
Batteries, like hydrogen fuel for fuel cells, are not primary energy sources, thus their use can actually increase pollution in the absence of cleaner primary energy harvesting techniques, such as wind, solar, tidal, etc. What electric cars WILL do is move the pollution from your tailpipe to a central location, e.g. your friendly neighborhood powerplant.
As for the battery industry in the USA… there are many companies with novel and promising technologies in the USA. While they don’t get the gov’t support that a Korean chaebol might, their kind of start-up business has a much better chance to survive and flourish in the USA. Plus, there’s some good research in academia on batteries too, e.g. Sadoway at MIT. It’s safe to expect some breakthroughs in the USA for battery technology, I just hope it’s sooner and not later.
WK> The flaw in the argument as I see it is that battery technology is just that, technology. Its not something dug from a specific geographic locale. To be dependent on “East Asian Batteries” a few things would happen:
1. A superior technology will never be found by company other than LG Chem
2. The manufacturing method is so complicated for LG Chem batteries that when they come off patent, nobody can reproduce them
3. The manufacturing method is so complicated for LG Chem batteries that when they come off patent they will have a significant advantage in the production methods so as to overcome newer generic batteries
4. If things really, really, really go bad, you assume that the US government would not just invalidate the US patent, and allow whoever in the US to produce the thing.
Let me add, who really cares who makes the batteries. So its LG Chem, what difference does that make to the US?
So Korea makes a few shekels off batteries, I am sure they will allow us to make a few shekels off things like Movies or Beef…oh wait.
Sorry you’re so disappointed, WangKon. I have a degree in biochem, and so I disregarded a vehicle that plugs into a wall for just the reasons cmm gives: If you generate 100 kJ of energy by burning coal or oil at a power plant, you can expect to lose almost half of it in the grid, outputting around 55 kJ of energy at the household socket. All 100 kJ of coal was burned, though, and the pollution is in the air.
Second, I’d personally prefer if GM just die. I won’t be able to take anything they do seriously for a while, I’m sure. I’d also prefer that North American cities stop planning cities that assume everyone owns a car, thereby forcing everyone to own a car just to live in those cities. My hometown of Calgary, if anyone has seen it, is a prime example of ultra-low population density urban sprawl.
Third, regarding the issue of UW industrial leadership, you’re right, of course. In the last bubble, investment went into Silicon Valley tech. 95% of those companies went bust, but the 5% that survived created enough wealth to make up for it. America had previous booms that funneled investment into industrial capacity. When the booms busted, the factories remained, ready to build when wars broke out or foreign consumers beckoned.
This time, the boom was based on nothing more than low interest rates and house prices. Rising home prices drive consumption of consumer goods, but they are not engines for growth of the world’s largest economy. HEY AMERICA!! You created $10 trillion in new stock market wealth from the start of 2006 until Oct 2007, and since the peak have gone another $10 trillion into debt. The stock market wealth is gone, the debt remains, and what have you got to show for it? Where are the factories? Where are the high-tech companies, the battery makers, the green technology, the life-saving medicines? You’re an investment banker, WangKon. What the hell did you expect? Did you really think that shuttling the same damn loan around a dozen different financial companies with each one hedging the previous version and taking a margin slice was any way to lead the industrialized world?
Your linked article says that LG got the contract because their design was better and because they have their own factories (A123 does manufacture in China). These two factors are related – closely related. You learn by DOING.
That “UW” should be a “US”
SEOUL, Jan 12 (Reuters) – South Korea’s LG Display (034220.KS) said it had signed a deal to supply LCD panels to Apple Inc (AAPL.O) for five years.
The world’s second-biggest maker of LCD screens did not disclose the total size of the deal but said in a filing to the Korea Exchange that it would receive a $500 million advance from Apple this month.
Linkd,
My IB experience is not in moving money from one place to another and making my nut on the arbitrage.
I help put companies together, build economies of scale and make 2+2=5. Case in point. We buy a laboratory product manufacturer (started by an Indian American btw because it seems that nowadays White Americans, other than notable exceptions like Apple and Caterpillar, have “cantmakeshititis” or “outsourceallourshititus”) that’s doing $5M in EBITDA. In three and a half years we help the company, through add-on acquisitions, do $25M in EBITDA. We exit our investment and make 10x on the initial equity. Myself personally I only take out a tiny fraction of the value generated because I wasn’t a partner back then, despite the fact that I did 95% of the fucking work.
#16 How does that happen exactly, are these batteries dug out of mines or self-charging or what?
#19 have a degree in biochem, and so I disregarded a vehicle that plugs into a wall for just the reasons cmm gives: If you generate 100 kJ of energy by burning coal or oil at a power plant, you can expect to lose almost half of it in the grid, outputting around 55 kJ of energy at the household socket. All 100 kJ of coal was burned, though, and the pollution is in the air.
Let me see if I’m following the logic here. Electric car batteries simply transfer the pollution from the car to the oil or coal-fired power plant. So we keep our existing CO2-emitting internal combustion engines and wait on the electric car thing until the entire grid has switched over to clean alternative energy?
Either you’re both big oil lobbyists in training or advocates of the Fred Flintstone mode of transport.
You don’t get something for nothing, Kim. That’s all. It’s been known since Newton.
The Prius burns gas and converts the car’s kinetic energy into stored energy in a battery. It therefore makes much better use of burned fossil fuel.
The Volt uses an inefficient (leaky) channel to bring fossil fuel energy into a car’s battery, and so makes poor use of fossil fuel.
Options for improvement: Reduce airborne pollution by pumping power into the grid from nuclear power stations, not coal-fired stations. / Make the grid more efficient by upgrading its cables and switches. / Improve overall automobile design to minimize energy loss from heat & friction and capture the energy in onboard batteries. / Use home-based charging stations for Volt-type vehicles, with power partially generated by wind or solar, or even the owner burning coal himself to power the generator, because this would eliminate much of the loss of power to the leaky grid….
Emanuel Derman, former Goldman Sachs uberquant:
“Let me see if I’m following the logic here.”
This sounds entertaining.
“Electric car batteries simply transfer the pollution from the car to the oil or coal-fired power plant.”
Or the nuclear plant, etc. The energy in the batteries has to come from somewhere.
“So we keep our existing CO2-emitting internal combustion engines and wait on the electric car thing until the entire grid has switched over to clean alternative energy?”
As long as the energy going into their batteries comes from polluting energy sources, electric cars are mostly just moving the pollution around, yes. If this fact seems to play into the hands of big oil lobbyists, well, that’s good for them–analyses solidly based on the first law of thermodynamics are hard to refute. Moving to electric certainly isn’t meritless though. Less polluted cities are nice. Another example is, if/when the day of abundant clean alternative energy comes, the electric car infrastructure will be in place to harness it.
Also, what Linkd said.
Some numbers (I would post the sources but posting more than one link here is painful – most of them are from wikipedia sources)
The average internal combustion engine (not running on any gas but a liquid called petrol) has a thermal efficiency of about 25%.
Nuclear and fossil power plants have thermal efficiencies of about 36%.
Transmission and distribution losses amount to about 7% of generated output. So 33.5% thermal efficiency to the socket.
The NEMA standard for electrical motors operating at 300 HP (small compact car) is around 95%.
Putting it together, I reckon a car run straight from the socket has an equivalent thermal efficieny of roughly 32%.
One should also add in regenerative braking when comparing to combustion. The Volt has regenerative braking.
The Prius seems to have a thermal efficiency between 30% and 35%, but it’s not clear how that is calculated. http://www.transportation.anl.gov/pdfs/HV/2.pdf
The State of California generates 45% of its grid electricity from nuclear and renewables. Countries like France are much higher.
Having said all that, someone on the net has probably studied this subject in far greater detail than me.
Andrew Frank and the guys at UC Davis may be a good place to get more info.
“When the world’s automakers and transportation policymakers need unbiased analyses of new automotive technology, they bring their cars to UC Davis.”
http://www.news.ucdavis.edu/search/news_detail.lasso?id=8387
“Some numbers (I would post the sources but posting more than one link here is painful – most of them are from wikipedia sources)” (eujin, #27)
“Having said all that, someone on the net has probably studied this subject in far greater detail than me.” (eujin, #28)
Hmmm, ‘probably’, you say? Well, I suppose that’s possible.
You’re supposed to go and find it.
eujin, that was merely a comment on your use of Wikipedia sources, coupled with the idea that others may have only ‘probably’ studied the subject in greater detail. And, in case you hadn’t noticed, it was only meant in fun (viz. the happy, friendly winking emoticon).
Ouch!
Toyota to report first operating loss in 70 freak’in years!
http://www.iht.com/articles/2008/12/22/business/toyota.php
No one is immune… BUT with $18.5 billion in cash on the books and very little debt, Toyota can easily bail itself out without any government handouts…
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