A123 Looks Set to Land U.S. Funds for Battery

By STEPHEN POWER and REBECCA SMITH
WASHINGTON -- The Obama administration plans to announce Wednesday the winners of $1.2 billion in federal stimulus funds for makers of advanced automotive batteries, part of an effort to make sure that electric cars sold in the U.S. run on American-made power sources.
One of the winners in a competition that drew applications from more than 100 companies is A123 Systems Inc. of Massachusetts, according to people familiar with the matter. Among other companies in the running for grants are Johnson Controls-Saft Advanced Power Solutions LLC -- a joint venture of Johnson Controls Inc. and French battery maker Saft Groupe SA -- and EnerDel, a unit of Ener1 Inc.
Vice President Joe Biden is scheduled to name the winners at an event in Detroit on Wednesday. People familiar with the matter said A123's chief executive, David Vieau, is expected to attend Wednesday's announcement. Representatives of Detroit's three big auto makers -- General Motors Co., Ford Motor Co., and Chrysler Group LLC -- have been asked by the Obama administration to provide photogenic electric vehicles for the occasion.
A spokesman for A123 declined to comment Tuesday. The event in Detroit is one of several the Obama administration is planning to highlight its efforts to accelerate the transformation of the U.S. automobile industry into one that will be more competitive and less polluting. Also on Wednesday, Energy Secretary Steven Chu is scheduled to visit Celgard LLC, a Charlotte, N.C., company that supplies material for lithium-ion batteries.
An Energy Department spokeswoman declined to say which companies have been selected to receive grants, either for battery-manufacturing plants or facilities capable of supplying the industry with the advanced materials it will need. A spokeswoman for Celgard, which announced in May that it was seeking funding from the agency, didn't respond to a call seeking comment. Spokesmen for Johnson Controls and EnerDel declined to comment or couldn't be reached.
The Obama administration has $2 billion in stimulus funds earmarked for advanced-battery efforts, part of the economic-stimulus legislation approved by Congress in February. The Energy Department has said it will distribute $1.2 billion to battery-manufacturing companies and $800 million for battery-materials companies, part of a larger effort to quickly develop a domestic capability to produce millions of batteries for electric cars being developed by General Motors, Ford, Toyota Motor Corp. and others.
Lithium-ion batteries are the preferred technology for electric cars, because they deliver more punch for their size and weight. Most of the capacity to manufacture them exists in Asia, where it was developed to supply consumer electronics such as laptop computers. But the U.S. government doesn't want to trade dependence on foreign oil for dependence on foreign batteries.
Another factor is that lithium-ion batteries aren't expected to be a commodity product, unlike most automotive batteries today. They will have different chemistries and cell types. The batteries with the best technologies are expected to confer significant competitive advantages to select auto makers. Batteries are likely to be expensive, perhaps thousands of dollars apiece, and the Department of Energy wants each to be capable of moving a vehicle 40 miles before becoming depleted or needing a boost from a gasoline engine. That would be enough range to meet the average daily needs of 70% of U.S. vehicles.
Questions remain, however, about how much demand there will be for all-electric or plug-in electric cars, which are likely to be expensive initially.
Awards for A123 and Johnson Controls-Saft would be a boost for Michigan, whose economy has been racked by the collapse of the U.S. auto sector. Both firms want to expand manufacturing in Michigan. In April Chrysler selected A123 to supply lithium-ion battery cells, packs and modules for electric cars that it expects to have in showrooms in late 2010.
Write to Stephen Power at stephen.power@wsj.com and Rebecca Smith at rebecca.smith@wsj.com