Funds Flow to Electric Cars

White House Unveils $2.4 Billion in Grants to Jump-Start Industry in Midwest
By ELIZABETH WILLIAMSON
WAKARUSA, Ind. -- President Barack Obama used a factory in one of the most economically battered U.S. manufacturing regions Wednesday as the backdrop to unveil $2.4 billion in stimulus grants to jump-start an electric-vehicle industry centered in the Midwest.
President Obama has announced a $2.4 billion plan to revitalize the U.S. electric car industry. The plan aims to make America a key player in an industry dominated by Asian and European manufacturers, Joseph White reports.
The program, outlined by Mr. Obama, Vice President Joe Biden and other members of his administration in separate appearances in six states, would make the U.S. government the major financial backer for 48 different projects to develop and produce electric-vehicle batteries, electric-drive components and various kinds of electric vehicles.
The government also would be a major customer for those ventures, committing to buy thousands of electric and hybrid vehicles from General Motors Co., Ford Motor Co., Chrysler Group LLC and some smaller manufacturers. The role is vital to creating demand. Auto-industry executives are unsure whether consumers will pay premiums that run to thousands of dollars for electric vehicles if gasoline prices remain at current levels.
Mr. Obama's own automotive task force cast doubt in a report on the viability of GM's coming Chevrolet Volt plug-in hybrid. Mr. Obama's plan calls for the government to buy as many as 625 Volts for electric utilities and consumers to test.
Grant Recipients

See which companies were awarded grants and where their projects will be located.
Government grants also would subsidize installation of electric-vehicle charging stations; lack of stations has been one of the obstacles to wider use of battery-powered vehicles.
"I want the cars of the future and the technology to power them to be built right here," Mr. Obama said to cheers from workers at Monaco RV, a struggling recreational-vehicle factory in Wakarusa, a northern Indiana town of 1,800 that has an unemployment rate of 18%. "For too long, we failed to invest in this kind of innovation, even as countries like China and Japan raced ahead."
Obama administration officials say the government needs to help U.S. manufacturers catch up with Asian rivals who have moved more aggressively to develop such critical technologies as automotive lithium-ion batteries and related technologies.
The move also reflects the belief by Mr. Obama's economic team that current lower oil prices won't last: In its models for the future, as part of the GM and Chrysler bankruptcies, the president's auto task force assumed that gas prices would rise above $4 a gallon by the middle of the next decade.

The Obama administration says the government money will leverage another $2.4 billion in private investment by recipients. The bulk of the Department of Energy money goes to seven companies in Indiana and 11 in Michigan, two states with the nation's highest unemployment that will play a strong role in Democrats' fates in 2010 congressional races and Mr. Obama's 2012 re-election run.
Some companies that failed to get grants questioned why most of the winners were large, well-established companies, such as GM, Johnson Controls Inc. and Saft Groupe SA of France.
"Innovation in this arena frequently comes from the smaller guys," said Mark Mills, chairman of International Battery Inc., a venture-capital-backed battery maker in Allentown, Pa., that had unsuccessfully sought DOE funding for an expansion. "If we wound the clock back to 1980 and had the government funding computer operating systems, the probability that Microsoft would have been funded then would have been small."
Losers in the competition for funding also said the program would benefit a significant number of foreign-owned companies, either directly or because they are joint-venture partners with the U.S.-based firms. Compact Power Inc., which received $151.4 million for production of lithium-ion battery components for the Chevrolet Volt, is a unit of South Korean battery maker LG Chem Ltd.
"There's more money in this for South Korea than for California," said Rep. Brad Sherman (D., Calif.). The Energy Department did award $45.4 million to the South Coast Air Quality Management District in Diamond Bar, Calif., to support the development of plug-in hybrid trucks and shuttle buses. But Mr. Sherman noted that the construction of those vehicles is slated for Michigan and Kentucky.—Stephen Power contributed to this article.
Write to Elizabeth Williamson at elizabeth.williamson@wsj.com