"A123 Systems Seeks $1.8 Billion Federal Loan For EV Battery Factories in U.S." Green Car Advisor

A123 Systems Seeks $1.8 Billion Federal Loan For EV Battery Factories in U.S.

By John ODell, Senior Editor

Advanced automotive battery developer A123 Systems has plunged into the government funding pool with an application for $1.84 billion in loans to help build several lithium-ion battery plants in the U.S.
The 7-year-old company is seeking the loans from the $25 billion Advanced Technology Vehicles program recently funded by Congress.

The so-called retooling loans are available to help automakers and automotive parts and components makers retool existing plants or build new ones dedicated to building more fuel-efficient vehicles.

In a statement issued Wednesday, A123 said that, if granted, the loans would help it "dramatically expand production capacity" to supply battery systems for up to 5 million conventional hybrid vehicles or 500,000 plug-in hybrids a year by 2013.

Fierce Competition

The company is one of dozens, in the U.S. and abroad, racing to develop powerful, reliable battery systems that will underpin the new generation of electric and hybrid-electric vehicles being worked on by automakers around the globe.

A123 Systems uses a proprietary nanophosphate chemistry to produce lithium-ion batteries. It's technology builds on work initially done by researchers at the Massachusetts Institute of Technology, where one of the company's three co-founders is a professor. Another is an MIT business school graduate.

The Massachusetts-based company was in a "quiet period" imposed by securities regulators prior to its proposed initial public offering and would not make any executives available for comment.

But in Wednesday's prepared statement, company CEO David Vieau said the auto industry is "entering a new phase...where we increase the electrification of vehicles, reducing consumption of gasoline though advanced batteries."

Many Customers

Among other things, A123 is a contender for the contract to supply batteries to General Motors Corp. for the upcoming Chevrolet Volt plug-in hybrid.

The company said it has contracts with a number of vehicle manufacturers including GM, Chrysler, the nearly insolvent Norwegian EV manufacturer Think, aircraft manufacturer Cessna, tool maker Black & Decker and Better Place, the nascent EV battery-exchange system supplier that has negotiated agreements to install and market its systems in Israel, Denmark, Hawaii and parts of Australia.

Vieau said that if A123 obtains the federal loans, its first new plant would be in southeastern Michigan, near the headquarters of all three domestic automakers.

Not coincidentally, Michigan recently approved a $335 million package of tax breaks to encourage companies to build battery research and manufacturing facilities in the state.

New Jobs

The loans would finance the bulk of an ambitious $2.3 billion plan by A123 to build a total of 7-million-square-feet of new factories that would produce battery cells and complete battery systems for clients' EVs and hybrids and would create as many as 14,000 new jobs.

As we reported Wednesday, more than $23 billion of the $25 billion in the loan fund already has been applied for, with GM, Chrysler and Ford seeking a combined total of $22 billion.

But the Energy Department, which oversees the loan program, has yet to grant any of the applications.

President-elect Barack Obama said during his campaign that he would like to see the loan fund doubled, and members of congress reportedly are working to include battery development funding part of the new administration's economic stimulus package.