LG Chem confirms delay at battery plant
Sluggish demand for electric vehicles has led South Korean battery maker LG Chem to delay the start of production at its new plant in western Michigan.
Production at the lithium ion battery cell plant was scheduled to start this year, but the company put 200 employees on a rolling furlough on April 30, and extended the furloughs on Aug. 30.
The company announced the delay in a statement issued this week.
The plant received a $151 million grant from the U.S. government under the Recovery Act Award for Electric Drive Vehicle Battery and Component Manufacturing Initiative. LG Chem also invested $151 of its own money in the plant, according to the Grand Rapids Business Journal.
The plant, which was expected to create 300 to 400 new jobs by 2013, got tax breaks from state and local governments, according to the newspaper. Production engineers, operators and office staff are working at 75 percent of their regular schedule, LG Chem Michigan said in a release this week. Although the furloughs are unpaid, employees are eligible to receive unemployment benefits and their regular health insurance benefits since company is paying the members’ shares of the benefits premiums. With these factors, the company predicts the furloughed employees still maintain around 85 percent of their regular monthly compensation, the release said.
LG Chem is not predicting when production will start, since it will depend on the market conditions and consumer demand for EVs, the release said. In the meantime, employees maintain and clean the equipment, take part in occasional team-building activities and volunteer at local nonprofit organizations.
LG Chem does not plan to use federal grant money to pay for any idle time; it plans to review prior billings and refund any money used for idle time to the government, the release said.
This month lithium ion battery maker A123 Systems in suburban Detroit, the recipient of a $249 million federal grant, filed for Chapter 11 reorganization and said Johnson Controls has agreed to acquire its auto battery business. LG Chem is the world’s top EV battery supplier, according to a March report by Pike Research of Boulder, Colo. The company generates annual battery sales of $8.5 billion for consumer electronics and other markets. A wholly owned subsidiary, Compact Power Inc., produces batteries for the Chevrolet Volt and Ford Focus EV.
General Motors once planned to build 45,000 Volts in 2012, but it sold just 16,348 through September. GM has backed off that prediction and temporarily suspended production in September.
The Volt retails for around $33,500, after a $7,500 federal tax credit.