recover from jobs lost in the auto sector, according to one industry expert.
“I think the view is, yes, longer term it is going to be major,” says Dave Cole, chairman of the Center for Automotive Research in Ann Arbor. “This is not going to be something that is going to be an economic driver in the short-term. Really, higher volume [of battery production] is five-plus years down the road.”
Cole is a member of the board at the Michigan Economic Development Corporation, which administers programs like the $800 million Advanced Battery Credits initiative to entice companies like A123 to expand in the state. Those efforts are baring fruit, and A123 has plenty of company in the state’s emerging energy storage sector. Milwaukee-based Johnson Controls is opening a plant in Holland, MI, to manufacture lithium-ion batteries. Also, Dow Chemical is working on a similar lithium-ion battery plant through a joint venture with TK Advanced Battery in Midland, MI.
A123 is tackling the auto industry after gaining early traction in the handheld tools market through a supply deal with Black & Decker. Yet lithium-ion batteries, which have been commonly used in mobile phones and laptops for years, haven’t become mainstream energy packs for cars. Early lithium-ion cells and their combustible chemistries were thought to be too dangerous to on the scale needed in autos. The nano-phosphate chemistry used in A123’s lithium-ion batteries, however, is supposed to be less flammable than those used in previous lithium cells. The company’s battery chemistry, which was initially developed in the lab of MIT professor Yet-Ming Chiang, also provides longer battery life and greater power than traditional lithium packs, according to the company.
Vehicle makers are recognizing the capabilities of A123’s battery systems. The German automaker Daimler already uses A123’s batteries in its hybrid-electric buses. In March, the company landed a supply deal to provide batteries for Warrenville, IN-based Navistar’s electric commercial trucks. A123 is also investing in and collaborating with the Irvine, CA, startup Fisker Automotive, which plans to use the company’s batteries in its hybrid-electric cars, including the Karma, a luxury plug-in hybrid that is due to begin production this year. The firm reported that its total transportation revenue rose 359 percent to $45.3 million in 2009, accounting for more than half of its $91 million in total annual revenue. (The company also provides large battery systems for stabilizing power supplies in the electric grid.)
Such market traction doesn’t mean it is clear sailing for A123, however, as numerous competitors are at various stages of figuring out how to make lithium cells safe enough and powerful enough for cars. The firm lost a very high-profile contest to the Korean electronics powerhouse LG Chem to provide lithium-ion cells for the Chevy Volt, GM’s electric car. LG is among several big companies in the battery business—including Dow, Johnson Controls, and Panasonic—that have much deeper pockets than A123. Yet A123 has been successful in raising cash to fund its ambitious plans, and last September the firm’s high-flying initial public offering brought in more than $380 million.
Forcier doesn’t seem like one to back down from a challenge, however. “We see the [auto battery] market is expanding quite quickly,” he says. “So we’re hopeful to be participating in that growth, and cost and energy density are the keys to being successful in that marketplace.” [Editor’s note: A previous version of this story mistakenly said that Forcier once played football for Indiana State University. It was actually his father that played at ISU. We regret the error.]
