Bob Lutz and A123 CEO Dave Vieau

General Motors Vice Chairman is announcing this morning that the company will now start working directly with A123 Systems on lithium ion battery technology. Up until now A123 has been what is known as a tier 2 supplier for GM. In the auto industry only tier 1 suppliers work directly with the car makers. The tier 1 suppliers then deal with lower level suppliers.

Previously GM had announced that they were awarding a development contract to Continental to develop a Volt battery pack with A123 Systems cells. The relationship with A123 will now be a lot tighter. More details coming later and we'll be talking to GM Battery boss Denise Grey as well. The press release is after the jump.

Update: All this actually means is that GM will be working more closely with A123 on development of the cell chemistry. This will allow GM to better understand how the cells work so that they can optimize the battery charge management as well as vehicle packaging and cooling. They already had a similar relationship in place with Compact Power parent company LG Chem. A123 will also be able to learn more from GM about the requirements for an automotive battery system.

[Source: General Motors]
GM and A123Systems to Co-Develop Lithium-Ion Battery Cell for Chevrolet Volt

Agreement Speeds Up Development of Chevy Volt's Innovative Propulsion System

TRAVERSE CITY, Mich. – General Motors Corp. and A123Systems, Inc. will co-develop cells with A123System's nanophosphate battery chemistry for a long-lasting, safe and powerful battery for use in GM's electric drive E-Flex system. The agreement is expected to expedite the development of the batteries for both electric plug-in vehicles and fuel cell variants of the E-Flex architecture.

"Breakthrough battery technology will drive future automotive propulsion, and the company that aligns with the best strategic partners will win. That's what is so important about this deal," said Bob Lutz, GM vice chairman of Global Product Development. "Whether you're talking about the Chevy Volt, a fuel cell or even a plug-in hybrid such as our planned Saturn Vue, we need to understand the fundamental battery cell performance."

The contract calls for A123Systems, of Watertown, Mass., to develop battery cells to meet the specific requirements of GM's E-Flex system. A123Systems is considered a forerunner in the development of nanophosphate-based cell technology, which, compared to other lithium-ion battery chemistries, provides higher power output, longer life and safer operations over the life of the battery.

The E-Flex electric vehicle architecture was first shown in the Chevy Volt concept car revealed earlier this year. For average commuters driving 40 miles, the Chevy Volt will use zero gasoline and produce zero emissions and could nearly eliminate going to the gas station altogether.

"The Chevy Volt will lead the automotive industry in a new direction," Lutz said. "We see a future where vehicles run on electricity and are equipped with clever ways of making electricity on board, making us less dependent on gasoline. It's the next great paradigm shift in our industry, an opportunity largely due to the rapid advancement in battery cell technology by companies such as A123Systems and LG Chem."

Earlier this year, GM awarded two contracts for advanced development of battery packs, which require the integration of multiple battery cells, to Compact Power, Inc., a subsidiary of Korean battery manufacturer LG Chem, based in Troy, Mich.; and Frankfurt, Germany-based Continental Automotive Systems, a division of Continental A.G., a tier one automotive supplier. Under these agreements, one contract was awarded to CPI, which will use battery cells developed by parent company LG Chem. A separate contract was issued to Continental, which will use the cells being co-developed by GM and A123Systems.

"A123Systems and LG Chem are both top-tier battery suppliers, with proven technologies," said Denise Gray, director of GM's Energy Storage Devices and Strategies. "We're confident one, or possibly both of these companies' solutions will meet our battery requirements for the E-Flex system."

Dave Vieau, A123System's chief executive officer, said this type of battery will be advantageous in other transportation industries as well.

"We're talking today about the Volt and implications that it will have on the electrification of passenger vehicles, but the technology goes a lot further than that," Vieau said. "The weight, size, safety and performance of these batteries have implications on all transportation, including hybrid buses, trucks and aircraft."

A123Systems currently manufactures over ten million cells annually making it the world's largest producer of batteries with nanophosphate chemistry. Most of these cells are used in rechargeable power tools.

The co-development of this battery technology is the latest step in GM's efforts to diversify the transportation away from petroleum with a range of alternatives. These include:

A diverse lineup of hybrid models is now in production, the GM diesel hybrid electric system for large city buses, the Saturn Vue and Saturn Aura Green Line hybrid models and the all-new Chevy Malibu hybrid. Coming this fall, the Chevrolet Tahoe and GMC Yukon Hybrid SUVs feature the world's first 2-Mode hybrid system in an SUV, providing up to a 40-percent improvement in city driving fuel economy to what is already the industry's most fuel-efficient full-size SUVs. Due next year is a front-wheel-drive 2-Mode hybrid Saturn Vue Green Line, with plans to make a plug-in version of the Vue that has the potential to achieve double the fuel efficiency of any current GM SUV.

GM is also a leading producer of E-85 capable bio-fuel vehicles, with more than two million on the road. Additionally, GM provides more vehicles that achieve 30 mpg highway than any other manufacturer in the U.S. market. GM is also the first automotive member to join the U.S. Climate Action Partnership (USCAP), a group of global companies and non-governmental organizations formed to support an economy-wide, market-driven approach to reducing carbon emissions.

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About General Motors
General Motors Corp. (NYSE: GM), the world's largest automaker, has been the annual global industry sales leader for 76 years. Founded in 1908, GM today employs about 280,000 people around the world. With global headquarters in Detroit, GM manufactures its cars and trucks in 33 countries. In 2006, nearly 9.1 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn and Vauxhall. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. More information on GM can be found at www.gm.com.

About A123Systems
A123Systems is one of the world's leading suppliers of high-power lithium ion batteries. The company's patent pending Nanophosphate™ technology enables its batteries to deliver previously unattainable levels of power, safety and life. Applicable to a wide range of industries, A123Systems' products remove many traditional technology constraints to provide OEMs expanded flexibility in system design. With the largest lithium ion R&D team in North America, world-class expertise and management, and global manufacturing operations, A123Systems' Automotive Class Lithium Ion™ batteries are leading the automotive movement towards platform electrification. Founded in 2001 and headquartered in Massachusetts, A123Systems' proprietary nanoscale electrode technology is built on initial developments from the Massachusetts Institute of Technology. A123Systems' wholly owned subsidiary T/J Technologies ( Ann Arbor, Michigan) is nationally recognized for new materials development and cutting-edge research. For additional information please visit www.a123systems.com.