GE Invests in Car-Battery Maker

A123 to Expand Production of Energy Systems for Hybrid, Electric Vehicles

By ALEX P. KELLOGG

Car-battery maker A123 Systems Inc. is expected to announce Monday that it has raised $69 million as part of its most recent capital campaign, and that primary backer General Electric Co. will gain a seat on the company's board in exchange for its investment.
The infusion will advance the Watertown, Mass., company's plans to build new factories in Michigan to manufacture the lithium-ion batteries, packs and modules it has been developing for the auto industry in recent years.
The boost for A123's plans is good news for Michigan, whose economy has been racked by the crisis in the auto industry, including the government-orchestrated restructuring of General Motors Corp. and Chrysler LLC. Michigan has been bleeding traditional manufacturing jobs in recent years, and the state's governor has been promoting alternative-energy industries as a potential salve.
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Chrysler plans to use A123 batteries in its prospective line of electric vehicles. Above, Chrysler executives introduce the 200C EV electric concept car in January at the Detroit auto show.
The funding news follows an announcement that Chrysler has selected A123 to develop batteries for the car maker's prospective line of electric vehicles.
Dave Vieau, president and chief executive of A123, said the success of the capital campaign indicates that even in the current economic climate, there is private-sector investor interest in alternative-energy technologies that show promise.
GE's Energy Financial Services and Capital Equity units provided $15 million in the latest round of financing. That brings GE's total investments in the battery maker to $70 million, representing an ownership stake of more than 10%.
Mr. Vieau said the new capital will help move the company closer to profitability by allowing it to scale up its manufacturing efforts. The added scale could also promote wider adoption of alternative-energy technologies, because it lowers the unit cost of battery packs and could bring down the cost of hybrid and electric vehicles. The company says its planned production facilities would be capable of supplying systems for five million hybrid electric vehicles or a half-million plug-in electric vehicles per year by 2013.
Questions remain, however, about how solid the market is for this new generation of car batteries. After a spike last summer, sales of hybrid vehicles have sunk along with the rest of the car market. And A123's partnership with Chrysler could be in jeopardy if the company is forced into bankruptcy.
Chrysler's battery-powered versions of the Jeep Wrangler, Jeep Patriot and Chrysler Town & Country minivan will all use A123 technology, if they make it to the market by 2013 as proposed.
Another client of A123 is SAIC Motor Corp., one of China's biggest state-owned auto makers.
Meanwhile, GM's highly anticipated Chevy Volt plug-in hybrid car is scheduled to hit the market next year, using batteries from a different manufacturer.
Mark Little, senior vice president and director of global research at GE, said he believes battery-powered vehicles are only a year away from being available to the average American consumer. "Even a 5% penetration in the auto industry is a huge market, and I see that happening quite rapidly," said Mr. Little, who will represent GE on the A123 board.
GE was an early investor in the battery maker, which said it has now raised more than $300 million since it was founded in 2001. A123 also makes batteries for power tools and for utility companies.
Write to Alex P. Kellogg at alex.kellogg@wsj.com