DETROIT -- General Motors is nearing a deal to buy Cobasys LLC, the troubled supplier that makes batteries for the automaker's mild hybrid vehicles, three sources have told Automotive News.

Problems at Cobasys, of suburban Detroit, hurt production of Saturn Vue and Aura mild hybrids and led to a recall late last year that affected 9,000 vehicles. Cobasys' joint owners -- Chevron Corp. and Energy Conversion Devices Inc. -- have been fighting over who is responsible for the battery maker.

GM called on turnaround and consulting firm BBK Limited to conduct a financial audit of Cobasys, according to an industry source familiar with the effort. GM often turns to BBK for help on supply chain problems.

The BBK assessment is part of GM's efforts to iron out problems at the supplier for a possible buyout. One acquisition strategy under consideration is a partnership, but GM would own 100 percent of the company, according to one source familiar with the situation.

The partnership would aid GM product development and the ability to sell Cobasys products, the source said.

Another source with knowledge of the talks said a deal between GM and Cobasys' parent companies is imminent. Chevron, of San Ramon, Calif., and Energy Conversion Devices, of suburban Detroit, each own half of the company, with Chevron holding a preferred interest.

Propping up the supplier

In a quarterly report last month to the Securities and Exchange Commission, Energy Conversion Devices said Cobasys' owners were negotiating to sell the company to an unnamed buyer.

The filing also said an unnamed customer has been propping up Cobasys since February by giving it a loan to purchase equipment and paying higher prices for its batteries.

GM has a strong interest in seeing Cobasys stay afloat. GM recalled the Cobasys-made battery packs in its 2007 hybrids because of a leak that caused the hybrid powertrains to shut down. In order to solve the problem, Cobasys stopped battery production for more than a month in December.

That shutdown hurt GM's production of its Chevrolet Malibu Hybrid, Saturn Aura Green Line and Saturn Vue Green Line. Mild hybrids use electric power from a battery pack to boost the gasoline powertrain.

If Cobasys were to fold -- a possibility if it isn't sold, according to Energy Conversion Devices regulatory filings -- GM would be left scrambling for a battery supplier for its mild hybrid models. A source told Automotive News last month that GM can't switch battery suppliers until 2010, when it is to release the next generation of mild hybrids.

A source who knows about Cobasys battery production in Springboro, Ohio, said the issues that halted production have been rectified. And the plant is producing batteries and filling GM orders. He said the plant has more capacity that it can devote to GM hybrids if more batteries are wanted.

The source also said that Cobasys batteries will be used on some of GM's upcoming hybrids.

"The outlook is very strong on battery production. There's no doubt that production will increase in the next year and a half," the production source said.

Owners fight, losses grow

Before the buyer emerged, Cobasys had been the subject of an arbitration fight between its two owners since September.

According to a quarterly report that Energy Conversion Devices filed with the SEC on May 8, Chevron's Technology Ventures unit accused Energy Conversion Devices of failing to fund Cobasys or agree to a Cobasys budget for 2008. Chevron also accused Energy Conversion Devices of not honoring Chevron's preferred interest in the company.

Energy Conversion Devices denied the charges. An arbitrator heard the case in January, but on Feb. 15, before the arbitrator could rule, Energy Conversion Devices and Chevron agreed to enter negotiations with "a potential buyer" who had made an offer for Cobasys, according to the filing. The filing said the deadline for a deal to sell the supplier has been extended seven times.

The filing also says that Cobasys lost about $76 million in 2007 and expects to lose between $82 million and $86 million in 2008.

Familiar ownership?

A GM purchase of Cobasys would mark the automaker's return to a company it helped found in 1994 as a joint venture with Ovonic Battery Co., a subsidiary of Energy Conversion Devices. GM sold its stake in the venture, then called GM-Ovonic LLC, to Texaco Inc. in 2000. Chevron and Texaco merged in 2001.

Calls to spokeswomen for Energy Conversion Devices and Chevron were not returned today. GM spokesman Tom Wilkinson declined to comment.

Richard Truett contributed to this report