General Motors made headlines, earlier this year, when it announced it had chosen the South Korean manufacturer LG Chem to provide the batteries needed to power the eagerly-awaited Chevrolet Volt. That plug-in hybrid, or extended-range electric vehicle, as GM prefers to call it, could revolutionize the auto industry, since it will allow a typical American to commute without using a drop of gasoline, but still have the ability to drive longer distances without long waits needed to charge Volt’s batteries.
Equally significant, at least at first blush, was the news that GM will set up a new battery plant to put together the T-shaped packs used in the Volt. But that second announcement was misleading — intentionally or otherwise. The facility the automaker is building will not produce the actual battery cells. Those will be made in Korea, a country that severely restricts U.S. imports, and then shipped to the U.S. for final assembly.
In automotive terms, a fair comparison can be made to the classic CKD plants companies like GM, Mercedes-Benz or Toyota have long operated in marginal, third-world markets that require “local” production. Everything of substance is actually made elsewhere, the parts then shipped to a CKD final assembly line for the finishing touches. One CKD scam is to remove the wheels or radio and leave those simple tasks to local labor. Another analogy would compare what GM has in mind to the plastic car models millions of Americans build. Simply pop off the parts and glue them together.
Why does this matter? Because the truly valuable part of battery manufacturing — including the core intellectual property — belongs to off-shore manufacturers, such as LG Chem. Unless this approach is changed, it could be argued, the U.S. would be as vulnerable as it is today, with its dependence on imported oil — perhaps even more vulnerable. There’s at least the potential to produce bio-fuels here in the U.S. and pump petroleum from domestic sources. But no president since Jimmy Carter has devoted, well, any energy to a national energy policy. It remains to be seen if the Obama administration comes up with a viable one. (more…)