'Beat Us If You Can'
Can GM’s intrepid investment in battery technology once again make it a major player in the global auto industry? Or is the once-formidable giant destined to become just one of many companies serving a slow-growing niche market?
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June 9 was not an auspicious day for a tour of General Motors’ fledgling battery-testing lab. Outside a refurbished beige building at the company’s once pre-eminent Warren technical center, a heavy rain drenched the grounds around the low-slung edifice that was once home to GM’s powertrain operations. Today it bears the title of Alternative Energy Center.
Indeed, it was hard to see how the opening of the dedicated lab in suburban Detroit was going to do much to dispel the gloom that had descended on the company during the previous six months. That gloom had deepened considerably the week before, as GM announced it would file for bankruptcy — bringing to an end decades of world dominance for the company (it emerged from bankruptcy July 10).
Beyond the spin and political grandstanding that naturally accompanies the opening of such an important facility, in this case the country’s largest test lab for automotive applications, the $35-million complex reveals that electric vehicles and battery technology are being considered long-term plays for the so-called “new GM.” The lab shows that the company’s efforts are likely to go beyond the Chevy Volt, a car GM hopes can create the kind of buzz the ailing company desperately needs.
The Volt — a plug-in hybrid that runs on lithium-ion batteries for the first 40 miles and is then aided by a regular gasoline engine after that, if necessary — is expected to go on sale in November 2010. But despite GM’s full-court public relations press on the Volt (the automaker announced in August that the vehicle could get as many as 230 miles to the gallon), there’s no certainty that the car will catch on with consumers, especially at a price approaching $40,000, according to media reports.
The lab, therefore, is a notable investment that doesn’t depend on Volt sales to determine whether GM sticks with electric vehicles. The 33,000-square-foot facility is composed of two parts. One side will test new battery technologies for future vehicles, such as different cell chemistries. Some of those cell chemistries may come from the University of Michigan, where GM has also sunk money to help create a curriculum for advanced battery technologies.
The other side is already testing battery packs for the Volt. The lab can put the batteries through tests that simulate 10 years of use in just two years. That’s an important task, since GM has announced it plans to manufacture battery packs in the United States. At present, the Volt battery pack is built by Compact Power, a subsidiary of South Korea-based LG Chem Ltd., and uses LG’s lithium-ion cell chemistry. But GM now considers battery-pack configuration and manufacturing a potential core ability to build on, and plans to make future electric-propulsion systems in-house.
“We’re very good at putting things together, so we can apply our core expertise to batteries, as well,” says Bob Kruse, GM’s executive director of global vehicle engineering for hybrids, electric vehicles, and batteries.* “This way we can drive our cost down and the affordability goes up.”
So what comes out of the lab could result in GM having a jump-start on a new technology at a cheaper price before its competitors — which includes virtually every automaker — as well as cell and battery companies around the world (see related sidebar). In fact, it could keep GM invested in electricity even if the first-generation Volt fails to be a commercial success. Kruse is confident of GM’s commitment, to the Volt and beyond, noting that the lab is already working on second- and third-generation Volt batteries with a focus on making them less and less expensive.
“The lab is a strategic opportunity to learn faster than anybody else,” says Tony Posawatz, the Volt’s vehicle line director. “This allows us to be more aggressive, and it’s an indication of the company’s strategy. It’s how we’ll differentiate ourselves.”
Yet even as CEO Fritz Henderson and other top GM brass touted the large investment in electrification, there remains uncertainty — both inside and outside the automaker — about the path the industry will take on electric vehicles and which companies will prosper along the route.
Auto industry analysts agree with GM’s assessment that electrification is the future of the industry. Yet most see electricity as a long-term play, with electric propulsion being one of several power systems that people are drawn to because of their lifestyles.
“It isn’t a case where we only have electric vehicles or only internal-combustion engines,” says Philip Gott, director of automotive consulting at Massachusetts-based IHS Global Insight. “We think electric will be bigger than a niche, but it will primarily be for people in urban environments, where it’s best-suited for use. Internal-combustion engines will still be the best solution for long-distance travel.”
Gott worries that companies will be too exuberant too soon about electric vehicles and get ahead of consumer demand. “We’ve been enthusiastic about a lot of things before,” he says. “There were hydrogen fuel cells, for instance. These technologies have come and gone; they haven’t achieved significant commercial strength.”
All these concerns present problems for GM as it embarks on life after bankruptcy. The company’s business model had been built around manufacturing vehicles for mass appeal. While segmentation is a critical part of the industry, it’s primarily been about meeting consumers’ needs in terms of space, hauling capacity, and creature comforts. The vast majority of vehicles are still built on the underlying technology of an internal-combustion engine. GM, Ford, and other traditional automakers know how to make such engines in vast quantities. They also have huge costs still sunk into making such engines — although less so now, as the bankruptcy gave GM and Chrysler the opportunity to unload many factories.
Moreover, GM has traditionally been out in front when it comes to cutting-edge technologies such as electrics like the EV-1 and the Autonomy hydrogen-fuel-cell vehicle. But in the long run, it’s ended up with little more than concept vehicles or small-scale projects that yielded little for the company commercially. The EV-1 in the lab’s lobby is a stark reminder of that past.
“GM’s strategy has been swinging for the bleachers with technology,” says John DeCicco, a former analyst with the Environmental Defense Fund and now a lecturer at the University of Michigan.
He says that, a few years ago, hydrogen fuel cells were all the rage at GM. GM promoted the Autonomy, a space-age-looking vehicle, and even used President George W. Bush in a 2005 photo op. While GM does operate one of the largest fleets of hydrogen-fuel-cell cars, the technology hasn’t taken off in the way that GM seemed to believe it would a few years ago.
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