A Bet on Clean Energy in the Automotive State

Keith Schneider
New York Times

February 2009, President Obama signed the American Recovery and Reinvestment Act, which among other things provided $2.4 billion to encourage development of a domestic industry to make lighter, more energy-dense lithium-ion batteries to power electric vehicles.

Two weeks ago, on July 15, the president flew to this small city on the shore of Lake Michigan to attend the groundbreaking for a $303 million, 650,000 square-foot battery plant operated by Compact Power, a subsidiary of LG Chem, a Korean company, and to see other evidence of the stimulus bill’s influence in Michigan. He did not have to travel far.

There are 17 new plants in production, under construction or approaching groundbreaking in Michigan’s nascent vehicle battery sector, according to the state Department of Energy, Labor and Economic Growth. Two of them, representing an investment of $523 million, are in Holland, a city of 34,000.

The Compact Power plant will produce batteries for the Chevy Volt, a hybrid vehicle assisted by a gas engine that is expected to be priced at $41,000 when it reaches dealers later this year, and for the electric version of the Ford Focus, which has a range of 100 miles and will reach the market next year.

In 2009, Deutsche Bank estimated global sales of electric, hybrid and other alternative-fuel, advanced-technology vehicles could rise by 30 percent this year, to 1.3 million. J. D. Power recently estimated that hybrid and electric vehicles could account for about 1.3 percent of an estimated 67 million in light-vehicle sales worldwide this year. And the D.T.T. Global Manufacturing Industry Group estimates that by 2020, electric vehicles and other “green” cars will represent up to a third of total sales in developed markets and up to 20 percent in urban areas of emerging markets.

Less than two miles east from the 120-acre Compact Power site is a second battery plant. Johnson Controls teamed up with the French battery maker Saft to transform a closed 129,000-square-foot automotive electronics factory into a $220 million, 173,000-square-foot battery plant that employs 35 workers, and could grow to 300 workers within two years.

Just like the Compact Power project, which is expected to open in 2012 and employ 450 workers by 2013, half of cost of the Johnson Controls/Saft plant construction was paid by a grant from the federal stimulus.

In all, 13 battery and related plants have received federal stimulus grants in Michigan. “This is a symbol of where Michigan is going,” Mr. Obama said in Holland. “This is a symbol of where Holland is going. This is a symbol of where America is going.”

That assertion attracted protests from the Michigan Tea Party, which dispatched several of its members to the groundbreaking. And it prompted a political dust-up with Representative Peter Hoekstra, a Republican candidate for governor who voted against the stimulus.

Before attending the groundbreaking, Mr. Hoekstra, a nine-term lawmaker who represents Holland, held a conference call with reporters in which he criticized the federal investments in battery manufacturing as “the wrong strategy, the wrong plan.”

Mr. Obama, near the end of his remarks, let Mr. Hoekstra know he was not pleased. “There are some folks who want to go back — who think that we should return to the policies that helped to lead to this recession,” the president said, adding tartly, “Now, it doesn’t stop them from being at ribbon-cuttings. But that’s O.K.”

Economic development and real estate specialists in Holland said they welcomed the federal funds. Kris DePree, the president of the Zeeland, Mich., office of Colliers International, the commercial real estate brokerage firm, said the plants would help stabilize commercial vacancy rates in the region, now around 10 percent. “We haven’t seen industrial investments like this in quite some time,” Mr. DePree said.

Randy Thelen, the president of Lakeshore Advantage, the nonprofit economic development organization that helped attract both plants to Holland, said such investments were crucial to the region’s future. Holland has lost 3 percent of its population since 2000, and the city’s unemployment rate climbed to nearly 18 percent early this year, according to state figures.

The two new plants, Mr. Thelen said, could stimulate a regional auto battery manufacturing and supply industry capable of eventually employing 10,000 people. That would rival the office furniture industry, he said, which employed 12,000 people in the Holland area.

“We have 8,000 people ready to go to work right now,” Mr. Thelen said. “This city could be the center of the American battery industry.”

Other cities in Michigan are also competing for that title. Toda America, a Japanese maker of lithium-ion battery components, broke ground in Battle Creek in April for a $70 million plant that will initially employ 60 people.

A123 Systems, a battery-technology innovator that got its start at the Massachusetts Institute of Technology, has offices in Ann Arbor and in Livonia, Mich., where it has an auto engineering unit that employs over 250 people.

Last year the company received $249 million in stimulus grants to develop a 291,000-square-foot plant in Livonia that opened in March, and to build another plant of similar size in nearby Romulus set to open next year. The company’s investment in southeast Michigan will total over $600 million, and more than 800 workers are expected to be employed at the two newest plants.

Dow Kokam, a new lithium-ion battery maker formed by Dow Chemical and two other companies, broke ground in May in Midland, Mich., on a $322 million, 400,000-square-foot plant. It expects to complete the factory in January 2012 and employ 320 people. Kristina Schnepf, a spokeswoman, said there were plans to expand the plant to 800,000 square feet soon after production began in 2012.

The statewide building boom follows a grim decade in Michigan, which has lost 800,000 jobs since 2000, roughly half in manufacturing and most of those in the auto industry.

Under Gov. Jennifer M. Granholm, a Democrat now concluding her second term, Michigan studied various industrial sectors around which to build a new economic strategy. State economic specialists focused on clean energy, and especially battery production for the next generation of energy-efficient vehicles. She helped persuade the Legislature to approve $1 billion in tax credits for companies involved in developing advanced energy storage systems for electric vehicles.

The federal and state spending on advanced batteries has encouraged construction in other sectors of the recovering auto industry. State unemployment dropped to 13.1 percent in June from a peak of 14.9 percent in March, according to federal data.

Lenawee Stamping, a producer of metal stamping and welded fabrications, is expanding a plant in Tecumseh, Mich., to accommodate more production of G.M. electric vehicles, adding some 140 jobs. Magna Holdings of America, a designer and maker of auto components and systems, plans to invest $49.2 million to expand its operations in four Michigan cities to produce electric car systems, creating 500 more jobs, according to the Michigan Economic Development Corporation.

“What’s absolutely critical is that we manufacture the components of a clean energy economy — the batteries, the wind turbines, the solar panels — right here in the United States,” Ms. Granholm told a conference of engineers and battery developers in Detroit on July 27. “Michigan intends to lead the way in clean energy manufacturing.”


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