‘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?
By conducting cell balancing tests, GM technicians help ensure the battery pack in the 2011 Chevrolet Volt plug-in hybrid is road-worthy. Photograph courtesy of GM Corp

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.

DeCicco remains skeptical of the company’s electrification plans. “What GM needs,” he says, is “to work on a technology that can be integrated into its basic business plan.”

Pumping money into what amounts to science projects may have been somewhat acceptable when GM was a profitable company, but as it emerges from bankruptcy, it has to watch what it spends its money on. Astute analysts posit that if the Volt doesn’t succeed, GM simply might give up on the project. “My worry is that the timing will be off,” Gott says. “If companies lose money with these investments, that will leave a bad [taste] in their mouths for continuing to invest in these technologies.”

That, Gott insists, is where government needs to step in and help the country adopt a long-term view. “The government,” he says, “can support the technology and even feed demand.”

For many years, executives within the U.S. auto industry lamented that the playing field was uneven in its competition with the Asian companies, because Asian governments subsidized many of the things U.S. companies had to pay employees for, such as health care and retirement. But at the same time, the U.S. auto industry had been opposed to virtually any intervention by the government, including increasing the fuel economy of vehicles.

But with the current economic crisis, all that has changed. The shift in thinking can be seen on a simple tour of the battery lab. Just a few years ago, no GM official was likely to have displayed government legislation in the company’s hallways. But at the end of the lab tour, Kruse makes a final stop in front of a framed copy of Michigan House Bill 6611, which was passed in late 2008 to subsidize corporate funding of electric vehicles through tax credits.

“This lab is a year ahead of schedule because of the state money,” he had said earlier in the interview. “It helped with our move into battery-pack manufacturing, as well. I’m not sure we were going to do that here without this kind of support.”

Now General Motors has to prove it can take that government support and go head-to-head with competitors such as Ford, Toyota, and Honda, and new players such as China’s Chery Automotive. The playing field is already somewhat tipped in Asia’s favor, because it has the upper hand in cell chemistry, so GM has settled on being the best integrator of cell technology that it tests and vets in the new lab. From there, it will arrange the cells in proprietary ways into battery packs.

Outdoing the competition will be up to Kruse, a handful of longtime GM executives, and a growing corps of young engineers working on the Volt and its successors. Even as other parts of GM have been downsized, Kruse says he’s been hiring engineers and retraining others to work on the Volt and the second and third generation of batteries. “This is as much of a calling as it is a compelling engineering challenge,” Kruse says.

“We’ve got an A-class problem that attracts ‘A’ students.”

Alisyn Malek and Tony Argote Jr. fit that description. The two 23-year-old design-release engineers didn’t see themselves going into the auto industry when they graduated from college a year ago. Although Argote was a GM co-op student while at Georgia Tech, his plan had been to go back home to Florida after college.

Malek, a Michigan native, was interested in wind-turbine technology. She was considering General Electric’s wind-turbine business as a place to start her career. Her initial reaction to working in the auto industry was “I didn’t want to do this,” she says. “I grew up here. I knew what engineering work would be like inside a car company. I wanted something more cutting-edge.” Both were lured to General Motors by the opportunity to work on what can only be considered cutting-edge.

Next year, GM will be one of the few mass-market companies launching a plug-in electric vehicle in the United States. Malek was persuaded to join GM as an intern last year by University of Michigan professor Ann Marie Sastry. Sastry, along with Kruse, directs the GM/UM Advanced Battery Coalition for Drivetrains, which is designed to increase America’s cell chemistry capabilities.

What they’ve found was not only new, but real, says Malek, who joined the company full-time after her internship. “When I started as an intern last April, the Volt was kind of a pet project. Yes, we were going to do it, but there was still a lot of force behind trucks.”

But she says as gas prices started to rise in the summer of 2008, she watched perceptions change from considering the Volt a project into viewing it as something everyone was on board with at GM. Argote says it was the decision to move forward with the lab that gave him a sense that things were truly marching toward electrification in a big way.

“The lab is a commitment,” he says. “It’s like when I ask my parents for something; I know they’re serious about it when they end up spending the money. At GM, we needed a space to test batteries, and so GM [cut] a check for it.”

Kruse acknowledges that the Volt “is just a step, just a cog. The country still has to shift its electrical footprint,” he says. “But I think we’re clearly in a leadership role. We’re going to stay out front; we’re not going to launch the Volt and take a deep breath.”

With just a year left before the Volt goes on sale, Malek and Argote are finding little time to breathe. Both are in charge of releasing parts for the Volt — something that rarely, if ever, would’ve happened at GM a few years ago. The two of them work on teams where the people with expertise are only a few years older than they are.

For Argote, that means working on a vehicle that could set the standard for how cars are manufactured and powered well into the future. “It would be sweet if what we’re working on is considered the ‘Google’ car,” he says. If people do end up saying “that’s so Volt,” as Argote somewhat jokingly hopes they’ll do, it will be because of people like Argote and Malek.

Neither is comfortable with the idea of working on something that’s just another project or is simply something that has to be done because the competition is doing it. “We want to be the people to beat,” Argote says. “We don’t want to beat our competition; we want them to look at us and say, ‘That’s what we need to beat.’”

That kind of “beat us if you can” feeling hasn’t been experienced inside of GM for some time. So while the Volt and GM’s vehicle-electrification plans receive the publicity, it may be that GM’s ability to woo young engineers such as Malek and Argote could end up being the most important part of GM’s reinvention.