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LG Chem's idle Michigan battery plant slammed by federal audit

The battery maker was supposed to have supplied General Motors, but has yet to build anything after spending $142 million of grants.

By Clifford Atiyeh Feb 14, 2013 10:36AM
In three years, despite spending $142 million of taxpayer money and being granted another $175 million in tax breaks, LG Chem Michigan has not launched a single battery for production electric cars.

Rather, many of its employees spent their days watching movies, playing games and volunteering for other companies, all while logging hours on a project that was supposed to build enough batteries for up to 60,000 electric cars by the end of 2013. Instead, the government paid these workers about $842,000 not to work.

The revelations, based on complaints from an LG Chem employee in October, come from an audit released by the Energy Department last Friday.

The Holland, Mich.-based lithium-ion battery maker, a subsidiary of South Korean electronics company LG, had agreed to supply General Motors with batteries for the Chevrolet Volt, but instead, due to LG's mismanagement, the automaker was forced to rely on batteries built in LG's South Korea plant.

LG Chem has spent nearly all of its $151 million grant, which was awarded by the Energy Department in February 2010 and taken from the controversial $787 billion stimulus fund in 2009. The plant is only capable of producing 60 percent of its agreed capacity. Less than half the number of expected jobs were created. LG Chem said that demand for the Volt was lower than expected -- this, despite Volt sales tripling last year -- and it underestimated labor costs, according to the report.

The Energy Department said it had "no leverage" to force LG Chem into production under the terms of the grant. It is only requiring the company to repay $842,189 in "questionable costs."

"Until the shift in production takes place or some alternative use for the plant is developed, U.S. taxpayers will receive little direct benefit from a plant for which they provided up to half of the funding," the department said.

LG Chem, in a statement to Automotive News, said that the audit was correct and that it was
"acutely aware of the disappointment arising from the delays in our start of production."

President Barack Obama had predicted there would be 1 million electric vehicles on U.S. roads by 2015, but only 53,000 plug-in vehicles were sold last year. Battery maker A123 Systems of Waltham, Mass., went bankrupt in October and was sold to a Chinese parts company just two weeks ago. Other clean-energy companies that received hundreds of millions worth of grants, including solar panel maker Solyndra and battery maker EnerDel, also went bankrupt.

Outgoing Energy Secretary Steven Chu, in a parting letter to department employees on Feb. 1, said that "only 1 percent of the companies we funded went bankrupt" and that the other 99 percent of the more than 1,300 clean-energy companies the department funded have not received the proper attention.

[Source: DOE via Automotive News]
12Comments
Feb 14, 2013 10:51AM
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There's a sucker born every minute  ( He's called a taxpayer )  Thank the President and congress.
Feb 14, 2013 1:48PM
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Another example of how our current administration is pissing our money away. God help us get through the next four years!! Congrats to the sheep that helped us get four more years of it, you must be very proud!
Feb 14, 2013 12:01PM
Feb 15, 2013 8:02AM
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Right on, Frosty!  Who the F voted for that loser, anyway?  I've never met anyone who has. The only thing that Obankrupt is good at is throwing our money at monumental failures. It will be his only legacy.

Did anyone else get a load of the absolute drivel he spewed out on Tues. night?

May God have mercy on us all

Feb 14, 2013 12:04PM
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"Outgoing Energy Secretary Steven Chu, in a on Feb. 1, said that "only 1 percent of the companies we funded went bankrupt" "

 

I don't care what percentage of companies went bankrupt, I want to know what percentage of the dollars spent went to those now bankrupt businesses?

Feb 20, 2013 2:49PM
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To a great degree the DOE is as much responsible for this as anyone.   Assuming a lot of the companies used the DOE's  2015 EV sales projection as a basis for their plans, its not surprising what a pile its turned into. 

Speaking of piles, I imagine there were a lot of mid level DOE employees holding their noses when the word came down from above that they had to produce a document that supported Mr. Obama's 1 million EV sales goal.  
Feb 17, 2013 4:18PM
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There may be an unpleasant truth behind why the outgoing Energy Secretary is really choosing to leave his post.  Is there more to come?
Feb 14, 2013 5:42PM
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"only 1 percent of the companies we funded went bankrupt" 

Considering that over 95% of all small businesses go bankrupt within 5 years of being created, that's actually not too bad. Most venture capital firms don't do better than this, and that includes Mitt Romney's Bain Capital. Stop complaining.
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