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GM, LG won't team up for fourth battery plant

General Motors Co. will build a fourth U.S. battery cell manufacturing plant but for now the Detroit automaker and partner LG Energy Solution aren't planning to build it together, The Detroit News confirmed Friday.

GM and LG through their joint venture Ultium Cells LLC planned to have four U.S. battery cell plants together. One is in operation in Warren, Ohio, near GM's former Lordstown Assembly Plant, a second will open late this year and a third is under construction in Delta Township near Lansing with a 2024 completion date. GM and LG were looking at a site in New Carlisle, Indiana, for the fourth location and even received incentives for the project. But the plans, at least with LG, have been halted, as first reported by The Wall Street Journal earlier Friday.

GM will still need more cells to meet its EV goals. The automaker wants to produce 400,000 EVs in North America by mid-2024 and says its planned cell production will make that happen. GM also says it expects to have the capacity to make more than 1 million EVs in North America by 2025.

"We’ve been very clear that our plan includes investing in a fourth U.S. cell plant, but we’re not going to comment on speculation," GM spokesperson Pat Morrissey said in a statement.

LG Energy Solution in a statement to The Detroit News said, "Discussions on a fourth Ultium Cells JV plant remain ongoing between LG Energy Solution and GM, but no decision has been made."

Before the Journal's report was released, Gerald Johnson, GM's head of global manufacturing, told The Detroit News to "stay tuned" for more information on the fourth battery plant.

"I was just last week down in the Ultium facility in Lordstown watching them produce and they're ramping up well," he said. "They're exceeding ramp-up expectations."

GM and LG announced their collaboration on the battery cell manufacturing sites in 2019 after LG for years supplied the automaker with cells for its EVs including the Chevrolet Bolt. Each battery cell manufacturing location investment has come with a more than $2 billion investment.

In August 2022, Ultium confirmed it was considering a site in New Carlisle, Indiana, for the location of its fourth battery plant. And in September officials in St. Joseph County where the site is located awarded the company tax exemptions to save Ultium $270 million over 15 years.

Jeff Rea, president & CEO of the South Bend Regional Chamber in Indiana, said officials there have mostly been working with GM on the fourth battery plant project, not LG, and spoke with representatives from the Detroit automaker as recently as Thursday.

"GM's been the lead (since) day one with us," Rea said. "And we talk almost daily, every few days, every week, at least, about our site. We remain really encouraged by something happening with our site there that involves GM."

Rea first heard about GM pausing the project with LG when it was reported Friday by the Journal.

"We think there's still a strong interest in doing something here," he said.

While the land will not be held "forever" for GM as it reevaluates, Rea said: "If we didn't feel confident about the direction it was headed, we certainly have some other suitors that we could spend some time with."

There’s been a land rush on megasites for these battery plants from Michigan to Arizona, Georgia and Texas as automakers aspire to hit 50% all-electric vehicle sales in the U.S. by 2030 in alignment with the Biden administration’s goals.

“It signals that you’re seeing a little bit of overenthusiasm,” Sam Abuelsamid, principal e-mobility analyst at market research firm Guidehouse Inc., said about the pullback. “They want to step back a little bit, and say, ‘Let’s wait a little bit before we decide what to do with a fourth plant. We’re not quite ready yet.’”

Guidehouse forecasts only about 35% of EV sales will be electric by the end of the decade as the industry faces challenges with converting consumers, affordability and raw material availability. GM says it now has binding agreements securing all the battery raw material it needs to support 1 million units of annual capacity in North America by the end of 2025.

In North America, battery plants are in production or have been announced to supply 645 gigawatt hours of available annual capacity in 2026, the amount needed to reach 50% EV sales, Abuelsamid said, and additional plants to supply more than that have been announced.

“It wouldn’t be a huge surprise that LG might want to slow down on the fourth plant,” he said. “They don’t want to end up with a plant sitting underutilized.”

Some underutilization isn't a bad thing as the industry seeks to transition customers to EVs, said Warren Browne, an auto supplier consultant and former GM executive who worked at the carmaker for 40 years. But the decision represents a “reality check." Browne forecasts only half of the available battery capacity will be utilized mid-decade.

“Part of that is due to the economy. Part of that is just due to general demand and price increases,” he said. “This is what I would call a conversation-of-capital move related to timing. At some point in the future, will they have a fourth battery plant, absolutely. There is a rollout and reality check in timing that any company that is trying to manage their cash would do.”

There may be some more clarity after the U.S. Treasury Department issues guidelines in March for implementation of the Inflation Reduction Act. It will institute new North American-made requirements for vehicles and their components for EVs and plug-in hybrids to qualify for a $7,500 rebate applied as a discount.

“Manufacturers want to take a closer look at the impact of the IRA,” Browne said. “What’s the rush? There is no rush. There is a practical case for EVs to be a choice for consumers moving forward. That’s it.”

It typically takes three years from when a battery plant is announced to be running at full production. The three plants GM has announced represent a combined 120 gigawatt hours of annual capacity, which could produce more than 1 million EVs, Abuelsamid said. The automaker expects to have the capacity to make 1 million EVs annually in North America by 2025.

“They’ve got enough capacity for that,” Abuelsamid said. “They have a little time yet before they really need to start moving dirt around and start construction on another plant.”

LGES also doesn’t have the experience GM does with the United Auto Workers. Its plant in western Michigan’s Holland, where it is quintupling production, isn’t organized. The UAW, however, will start negotiating a contract for the Ultium Cells plant in Warren, Ohio, later this month after workers there overwhelmingly supported organizing in late December.

Abuelsamid added that quality issues in batteries produced in Holland by LGES resulted in every all-electric Chevrolet Bolt vehicle being recalled because of fire risks, which may have contributed to friction between the two companies.

If GM works with another supplier, it could explore lithium-iron-phosphate chemistries that have been gaining popularity among automakers for being less likely to catch fire, despite having less power density than the batteries made with aluminum, cobalt, manganese and nickel currently used in the chemistry-agnostic Ultium platform. It perhaps even could partner with a maker of solid-state batteries that the industry hopes will offer greater range.

"Maybe," Abuelsamid said, "GM might want to go in a different direction."

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