The General Bets on Electricity

A battery for the Chevy Volt being assembled at GM's Brownstown Battery Pack Assembly Plant

It’s that time of year again, sports fans. No, not the Super Bowl. Ground Hog Day, that day when meteorologists make bets about whether a rodent sees or fails to see his shadow in an attempt to predict how soon spring will arrive. Unfortunately, no one ever seems to demand payment for those gambles. A week ago, GM launched a much riskier venture related to electric vehicles. Be there no mistake: three years down the road, shareholders will hold The General accountable.

Last week, GM announced that it would build electric motors for electric or hybrid vehicles at its White Marsh, Maryland factory, which currently builds transmissions for full-size truck hybrids. It would be the first such undertaking of its size in the US. In order for the move to pay off, fully or partially electric vehicle sales must rapidly proliferate in the near term. The announcement included a $246 million commitment by the automaker, a $105 million grant from the DOE, $4.5 million from the state of Maryland (comprised of $1.5 million for job training and $3 million from the Maryland Economic Development Assistance Fund), and $6 million in grants from Baltimore County. The facility, which opened in 2000, would receive a 40,000 square foot expansion and add approximately 200 manufacturing jobs, doubling employment at GM’s Maryland operations.

Vice chairman for global product operations Tom Stephens said:

GM has decided that batteries, electric motors and power electronics will be core to GM.

Last year, GM said it’d build battery packs and electronics for the Volt and future electric vehicles. It is building the batteries for the Volt in its Michigan factory by reassembling lithium ion cells supplied by South Korea’s LG Chem. Batteries are the current hot topic, but GM believes that motors will be the key to its success. Stephens continued:

In the future, electric motors might become as important to GM as engines are now.

No automaker would contract out its gasoline engines, which partially explain The General’s proprietary interest in electric motor technology. He continued:

By designing and manufacturing electric motors in-house, we can more efficiently use energy from batteries as they evolve, potentially reducing cost and weight.

Such progress is important, as the current system is so heavy only full-size trucks are substantial enough to bear it. GM hopes in-house development will continue to speed improvements: New GM-built motors will be smaller than those currently used in The General’s full-size trucks, allowing them to fit in smaller applications. As you read this, GM engineers are working with suppliers to formulate the final production motors to be used in the Volt. No details on the supplier for Volt motors were available at this writing.

Our only level of competitive advantage is our ability to develop faster than the competition and apply it to great new vehicles.

Continuing to espouse the advantages of self-sufficiency, Stephens pointed out that mastering the technology on its own means that GM will be able to pick the best supplier when it does have to buy from third parties, such as with the Volt. According to the Detroit Free Press, Toyota and Honda already build the electric motors for their hybrids, arguing that in-house production lowers cost. The Japanese manufacturers also have cultivated deep-rooted relationships with battery suppliers, relationships which US automakers say is slowing development of theirs hybrids. That arrangement is somewhat ironic as, in the 1980s, GM was partly responsible for developing the magnets now used in the electric motors for hybrids such as the Prius.

According to Reuters, GM and the Obama Administration hope to develop electric car technology in the US in order to cut into the Asian automakers’ and suppliers’ leads in a market that’s likely to take off. The President set the goal of 1 million plug-in hybrids on US roads by 2015, but analysts say that goal is perhaps a bit lofty because of the high cost of the technology to consumers and cities. Buyers can expect GM-built motors in rear-wheel drive hybrids in showrooms by 2013. Can you say Commodore hybrid?