GE Increases Investment in A123Systems; Total Position of $55M for 9% of Company
22 October 2008
GE is making its sixth equity investment in lithium-ion battery manufacturer A123Systems, putting $30 million into A123’s $102 million Series E financing. GE is the battery manufacturer’s largest single cash investor, with 9% ownership. The investments were made by GE Commercial Finance - Equity and GE Energy Financial Services, bringing GE’s combined total investment in A123Systems to $55 million. (Earlier post.)
GE made the announcement at a Battery Technology Symposium held at its Global Research Center in Niskayuna, New York. In addition to receiving capital from GE, A123 is drawing on the research and technology development expertise of GE Global Research to design battery system components for automotive programs. A123Systems says that it is participating in GE’s exploration of a dual battery system—the combination of two battery chemistries, one biased toward power and the other toward energy, into a single battery pack, in a DOE-funded project with Chrysler. (Earlier post.)
GE’s battery focus is large-scale; GE researchers are working on bringing the hybrid locomotive to market, and are also evaluating how GE’s hybrid technologies can accelerate advancements for other hybrid transportation platforms such as tugboats, buses and passenger cars.
GE’s hybrid locomotive is targeted to provide an additional 10% fuel savings and 10% emissions reduction, capturing and storing energy with a Zebra battery pack in the braking process. GE researchers have several projects underway with the US Department of Energy (DOE), including the partnership with Chrysler to demonstrate economically viable plug-in hybrid vehicle technologies within the next three to five years. The goal is to achieve an electric driving range of at least 40 miles for a vehicle platform, well above the average daily commute for motorists. GE is responsible for developing the dual battery energy storage system, while Chrysler will be responsible for the vehicle integration piece.
In January, GE’s Hybrid Vehicle team reached a milestone with the DOE, successfully demonstrating the first hybrid mine haul truck. The hybrid off-highway vehicle, used for open pit mining operations, was modified with a 450 kW Zebra battery pack that captures braking energy to save fuel and increase productivity.
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Small investments are all well and good, but the measure of the viability of A123/GE to secure a major auto manufacture as a customer is to build a large automated factory in the Midwest of America that can produce large quantities of batteries.
For the auto purchasing department they can't bet on a small company that contracts all its manufacture and manufacturing knowledge which then resides in its foreign tolling company. They can't be responsive enough; nor able to change/expand production levels very fast; nor diagnose problems in manufacture and resolve them quickly.
Nor do they have a means of forcing deliveries on a strict time schedule for "just-in-time" manufacturing, that all the auto companies now use. A tiny delay in shipments can force the assembly lines to stop,and auto makers can not afford to have that happen.
Posted by: stas peterson | 22 October 2008 at 06:49 PM
stas:
I agree with you on this one.
Yes, if we want future e-vehicles ESSUs to be built in USA, producers with very deep pockets have to be involved to ensure just in time essential delivery in very large quantities.
To lower cost, be more competitive and more profitable, many ESSUs major components may have to be made in China, India and other lower cost countries.
Integrated offshore manufacturers like BYD (China) will be extremely competitive. Many others will spring up in the next few years to fill an increasingly large market.
New improved ESSU technologies will also contribute to increased worldwide competition.
Interesting years ahead.
Posted by: HarveyD | 23 October 2008 at 07:58 AM
Good point both. GE sees all these exigencies undoubtedly as they are experienced due diligence investors. As oil pricing continues to fluctuate wildly so will the unpredicted costs of shipping to and from Asia. Considering that weight is a major concern for EV batteries - making them at home - near assembly plants is strategic.
Not only that but, jobs, the expenditure of the $25B retooling loans and political issues will heavily favor domestic manufacturing of nearly all new energy components. Like the astronauts used to say - when you're sitting on top of half a million pounds of LOX, the low cost bidder is no comfort.
Posted by: sulleny | 23 October 2008 at 09:05 AM
Geez, Did anyone else notice the implications here? This means they must have a private "market cap" of close to $600Million! It will be interesting to see what happens when they IPO which I expect will be even higher.
An interesting thought....Is it possible that this could be the first shot in a new industry "blowing the doors out" so to speak? Remember the first few wild IPO's in the internet sector and how it sparked everything? Maybe this will be the first in the next generation around clean tech and transportation in particular. It would be nice to see something spark a rally in the economy through a green, sustainable sector.
Posted by: DaveD | 23 October 2008 at 10:34 AM
The ZEBRA battery efforts of GE have been known for some time, but GE should have bought BETARD, the implementors of the ZEBRA to have them produce more high power versions before they disappeared. The ZEBRA battery is the only long life maintenance free battery that can be used in either locomotives or mine trucks at the temperatures required. In short electric distance plug-in-hybrid cars, ZEBRAs are best used along with NICAD or NIMH batteries, but a small flywheel unit could also work. GE should invest in MES-DEA to get more ZEBRA production. Lithium batteries may never appear in large locomotives because the required cooling system will make them less weight efficient than ZEBRA batteries. ..HG..
Posted by: Henry Gibson | 23 October 2008 at 11:15 AM
Battery cell manufacture could be a highly automated process. But the machinery to automate cell manufacture is not something that can be ordered off-the-shelf today. It would probably more resemble newspaper printing or linoleum manufacture than anything else.
It needs to be designed and debugged in a large factory environment, by numbers of experienced manufacturing engineers.
ABC employs none of these professional people. Ray-0-vac and Everready have them. Or had them. GE has them, but I'll bet the first large automated battery cell factory would cost $400-800 million dollars.
The interesting thing is that with high automation, America can compete in battery cell manufacture, and it needn't and probably would not be optimum to place it far from the auto assembly plants. Certainly not half way around the world in Asia.
There is another industry that employs lots of manufacturing automation engineers, and they could help A123, if they weren't too abstracted with their own internal problems.
The very definition of a "core competence" of an auto maker is manufacturing and automation competence. GM or Ford or Chrysler could design and build that automated battery cell plant, but they have other concerns at present. Like finding two Nickles to rub together.
GM observing the bad experience of Ford; and following the example of Toyota and Honda, is going to bring battery manufacture on a large scale in house. But that is when they have a spare moment, after avoiding bankruptcy issues.
If A123 had half an ounce of brains, they would recognize their niche "core competency" is as a battery chemistry and "battery cell designer". They would be talking to GM about a JV to use A123 battery designs, and let GM use its own engineers to design the automation facilities, and manufacture the designs in a highly automated fashion, in anyone of the many vacant GM factories.
Besides providing the battery designs, A123 could help raise some or all of the financing on their own name rather than the depressed GM name.
Posted by: stas peterson | 23 October 2008 at 02:24 PM
On further reflection, a JV with A123 and GM to build an automated battery cell plant in America would get all the financing it needed, virtually instantly. It might even pry open the governments usual slow actions, and start money flowing from the government's $25 billion dollar kitty much sooner than otherwise.
Posted by: stas peterson | 23 October 2008 at 02:32 PM
stas:
Are you serious? Have GM (or Ford and Chrysler) use government money (your money) to mismanage batteries mass production. They can't even manage vehicle production effectively and are going broke.
Wouldn't we be better off with standardized modular battery packs produced by battery people or car parts people like Magna etc? This is what happened with expensive LCD panels. A few very large plants supply the world.
Battery packs can easily be shipped in containers in very large volume. Weight is not a real challenge with large container ships and trains. Imported HEVs, PHEVs and BEVs will have the battery packs already installed.
Secondly, could the Big-3 produce high quality battery packs like Toyota is doing?
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