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GM joint ventured with LG on hybrid electric development


Friday, August 26, 2011

General Motors Co. and South Korea's LG Corp. will jointly develop a new lineup of battery-powered vehicles in an unusual pairing aimed at slashing the cost and time it takes to create electric cars.

The deal is a first-of-its-kind pairing between an auto maker and electronics giant in vehicle design and engineering. LG will cover roughly half the cost of creating a future portfolio of electric and hybrid vehicles and then become GM's supplier on anything the companies create together, a person familiar with the deal said.

LG Chem, a unit of LG, now supplies lithium-ion battery cells for GM's Chevrolet Volt and Opel Ampera battery-powered cars. The new arrangement would broaden LG's role to include everything from on-board battery chargers to climate-control and possibly in-vehicle entertainment systems.

GM hopes the match will help it push past rivals in the race to develop electric and gas-electric hybrid vehicles in the wake of new U.S. fuel economy requirements. Future demand for electric and hybrid vehicles is unpredictable as it depends largely on fuel prices, development costs and changing consumer trends.

"We don't know how big this market is going to be," said GM Vice Chairman Steven Girsky. "This is a way to go at it in an efficient way that doesn't risk the company."

Under the deal, LG will be able to sell to other companies technologies created with GM, which could substantially broaden LG's role in the global automotive industry.

"This is a strategic development for LG, and we fully support GM's goal to lead the industry in the electrification of the automobile," said Juno Cho, president and chief operating officer of LG Corp.

Under new standards announced this month by the Obama administration, auto makers must double their fleets' average fuel economy to 54.5 miles a gallon by 2025, a goal car companies and industry experts agree will require broader use of battery power in vehicles.

Auto companies are taking different approaches to figure out how to meet the goals. On Monday, Ford Motor Co. and Toyota Motor Corp. announced they would jointly develop a gas-electric hybrid system for light trucks and sport-utility vehicles.

"This technology being created is so different than the current automotive technology out there now, we are going to see more collaborations like this," said HIS Automotive analyst Jim Gillette. "You have to break through barriers and that takes new companies coming in.

For GM, the move is a step away from the company's inward looking ways. While GM has some partnerships with other auto makers and other companies, it has handled its most important developments in-house.

The auto maker, for instance is lagging behind much smaller rival Chrysler Group LLC in developing an eight-speed automatic transmission. In April, Chrysler announced had developed an eight-speed with Germany's ZF Friedrichshafen AG to go on sale later this year. A month later GM announced it planned to build one as well.

It's a pattern Mr. Girsky, in charge of corporate strategy and business development, is working change. He said GM hopes to learn from LG how to cut the time it takes to put out new generations of vehicles. The electronics industry faces much quicker turnaround times than auto makers.

"They are flexible, they are used to things changing quickly," GM's Mr. Girsky said of LG. "We need to get used to that."

Efforts will span the U.S. and Korea, Mr. Girsky said. The companies didn't say when they expect to release the first results of their cooperation, but he said work has begun.

The deal with LG allows General Motors to pair on electric-car projects with other companies, he said. Earlier this month, GM set a deal with lithium-ion battery maker A123 Systems Inc. to supply batteries for future electric vehicles.

By: DocMemory
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