HOLLAND, Mich. -- Three years ago, LG Chem's $303 million battery plant garnered unwanted attention when news reports revealed workers were watching movies and playing cards rather than building batteries.
As the facility sat idle, LG Chem was shipping lithium ion batteries from South Korea to power General Motors' Chevrolet Volt -- an embarrassment since the Michigan plant had been built with the aid of federal grants.
The slow days are now gone. Two of the three assembly lines operate 24 hours a day, and the plant is adding a fourth production line for an as-yet-unnamed customer. The plant also is expected to produce batteries for GM's next electric car, the Chevrolet Bolt, although LG Chem has not yet confirmed that.
Add it all up, and LG Chem appears likely to beat Tesla to the punch as the operator of North America's first battery "gigafactory," the name Tesla has given to the giant battery plant it is building in Nevada.
Tesla's plant has drawn headlines, but LG Chem quietly has positioned its Holland plant to be a formidable competitor and possibly the market leader. Navigant, a research firm based in Chicago, estimates the LG Chem factory could account for as much as one quarter of North America's total EV battery capacity by 2017.
The plant produces 650 megawatt-hours worth of battery cells annually, according to Navigant -- a production rate that could rise to 3 gigawatt-hours within a couple of years. If so, the Holland plant will be North America's biggest EV battery plant.
LG Chem executives declined to confirm Navigant's output estimate. But the company's optimistic assessment during an Oct. 21 plant tour suggests the plant is meeting expectations.
According to Nick Kassanos, president of LG Chem Michigan Inc., the Holland facility generates just two defects per million battery cells, evidence that the equipment has successfully gone through the debugging phase. And as customer orders grow, "there is room to expand without adding brick and mortar," Kassanos adds.
With a scalable production system, LG Chem can expand without risk of leaving costly equipment underused. "That equipment is very expensive, but they can put in exactly as much capacity as they need," said Sam Abuelsamid, a Detroit-based researcher for Navigant. "They don't have equipment sitting idle."
To be sure, LG must compete for EV battery contracts with Japanese rivals Panasonic Corp. and NEC Corp. And Tesla's $5 billion battery plant in Nevada is expected to launch production next year.
But LG Chem appears to be gaining market share. The Holland plant produces battery cells for the Volt, Chevrolet Spark EV and Cadillac ELR, according to Abuelsamid. The facility soon will launch production of cells for the Cadillac CT6 plug-in hybrid, and it likely will supply batteries for the Chevrolet Bolt next year.
More contracts appear to be on the way. In April, LG Chem announced it would hire more workers to produce batteries for a new, unidentified customer starting late this year.
Who is that customer? Nissan CEO Carlos Ghosn said in a July interview with The Wall Street Journal that he would consider buying batteries from LG Chem, which currently supplies Nissan partner Renault. Ghosn cautioned that a decision may be a few years away, however.
Another possible customer may be Tesla itself. The electric car maker has confirmed it has signed a contract with LG Chem to supply replacement batteries for the Tesla Roadster, which is no longer in production.
LG Chem spokesman Jeremy Hagemeyer declined to comment on any possible deals with Tesla or Nissan.
In any event, it appears that LG Chem's growing business with GM will give it economies of scale to win more non-GM contracts. And that could prove decisive.
Automakers have struggled to produce enough electric cars to justify the costly r&d. But costs will start to fall as volume picks up, noted Mark Reuss, GM's global product chief.
In October, Reuss estimated that the Chevy Bolt's battery is expected to cost $145 per kilowatt-hour -- an industry-low figure -- when it enters production next year. If that figure proves accurate, LG Chem's Holland plant will attract additional customers, which will drive costs still lower.
"Don't underestimate scale," Reuss said during his press conference. "Scale matters a lot. It's one of the big deficiencies in the EV business these days."
