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LG Chem could build battery cells in US

  LG Chem, chosen to supply batteries for General Motors’s Chevrolet Volt, could manufacture battery cells for the plug-in hybrid in the United States should volumes rise sufficiently, LG’s chief executive Bahn-suk Kim said on Monday.

Kim also told Reuters at the Detroit Auto Show that the South Korean company is in talks with other automakers about supplying next-generation batteries for electric vehicles, including plug-in hybrids.

LG Chem, which beat a tie-up between Germany’s Continental AG and A123 Systems in the race to provide lithium-ion batteries for GM’s heavily touted Volt car, plans to invest $1 billion on lithium-ion battery technology by 2013, Kim added. Under the contract with GM, LG Chem will manufacture the battery cells at its plant in Ochang, south of Seoul, Korea. The cells will then be shipped directly to a GM battery assembly facility to be built in Michigan.

“We’re very flexible,” Kim said when asked if LG Chem would eventually build battery cells in the United States. For now, Kim said LG Chem has enough manufacturing capacity in South Korea to meet GM’s production target. “We’ll invest $1 billion in the next five years to grow this battery business as a new growth engine,” Kim said, adding that the investment will be mostly made in the United States.

Prabhakar Patil, chief executive of Compact Power Inc, a Michigan-based unit of LG Chem, told Reuters: “You don’t want to build capacity and have it underutilized. But as soon as the conditions are right...we’ll establish the facility.”

GM, which plans to launch the Volt in late 2010, has said it expects to manufacture 10,000 Volt cars in the first 12 months of production, increasing that to 60,000 a year. The Volt, which is being designed to run 40 miles on a single battery charge, has become the centre piece of GM’s attempt to reinvent itself as a producer of “green” vehicles.

The Volt battery contract has been closely watched as the first test for an emerging technology expected to generate billions of dollars in sales in the coming decade. GM will give a 10-year, 150,000 mile warranty on the Volt. (Reuters)