Michigan bets big on batteries: $300M in tax credits to spur new jobs

Karen Bouffard / The Detroit News

Lansing -- Michigan hopes to become the nation's leader in manufacturing of lithium ion batteries for electric and hybrid cars after awarding $300 million in tax credits Tuesday that are expected to eventually create more than 6,600 jobs.

The credits approved by the Michigan Economic Growth Authority attracted companies from across the country and Korea to be among those developing and manufacturing advanced batteries for vehicles.

Another venture also was approved for tax breaks but lawmakers first have to pass an additional $100 million in credits for the project. The three ventures announced Tuesday got the last of $555 million in cell battery tax credits that easily passed in a bipartisan effort late last year. State Sen. Jason Allen, R-Traverse City, said he has drafted the bill for the fourth venture, between LG Chem of Korea and General Motors Corp.

The projects were rolled out by a jubilant Gov. Jennifer Granholm, who said they'll help Michigan corner $2 billion in federal stimulus money earmarked for advanced battery projects. In front of the Capitol building across the street from where the announcement was made, a half-dozen electric cars and hybrid vehicles were on display, including a Chevy Volt plug-in, Ford Focus hybrid and Chrysler Town and Country hybrid minivan, which the governor took for a spin.

"These are the kinds of jobs that are going to transform Michigan," Granholm said. "We are going from rust to green."

"Michigan intends to lead the nation to energy independence through teaming (automobile manufacturers) with suppliers to mass produce lithium ion batteries, and successor batteries."

Not everyone shared the governor's glee over attracting battery manufacturers.

Russ Harding, chief environmental policy analyst with the Midland-based Mackinac Center for Public Policy, a free market think tank, said lawmakers are putting a lot of money at risk for a technology that might not pan out.

"Lets not take this chance for a new type of energy just because we can get some federal dollars," Harding said. "We heard ethanol was our fuel of the future, and we can see how that worked out -- it's too expensive, we're subsidizing it and it doesn't work.

"I think that's where we're headed with these batteries. Ethanol, here we go again."

Ethanol's popularity has dipped along with gas prices, which average $2 a gallon.

Lithium ion batteries are not produced in the United States. The quantities made overseas are not great enough to supply the growing demand for batteries for U.S.-made vehicles.

The four battery projects would invest $1.7 billion to launch advanced battery manufacturing facilities in Michigan -- one each in Livonia and Holland, with the other two locations to be announced.

• Johnson Controls-Saft Advanced Power Solutions of Milwaukee will partner with Ford Motor Co. to mass-produce lithium ion batteries for plug-in cars in Holland.

• A123Systems of Watertown, Mass., got similar credits to make batteries for Chrysler LLC in Livonia.

• A project by KD Advanced Battery Group -- a partnership of Dow Chemical, Kokam America Inc., and Townsend Venture -- has yet to announce its location.

• Lawmakers have to approve an additional $100 million in battery cell tax credits to fund a fourth project by Compact Power, a partnership between LG Chem of Korea and General Motors Corp. The company expects to get a $100 million battery cell state tax credit over four years, plus another state tax credit valued at $25.2 million over 15 years.

The ventures plan to file applications for federal stimulus money, due by May 19 to the U.S. Department of Energy. Up to eight advanced battery projects will share $2 billion in federal grants to be awarded by mid-July.

Mary Ann Wright, CEO of Johnson Controls-Saft, said the venture will be up and running in 12 months once federal funding is approved. She wouldn't say what would happen if the company isn't approved for federal money. But she said the Michigan tax credit will give the company a decided edge in the application process.

"Certainly it would be a challenge (without the federal funding)," Wright said. "We have the Michigan investment, the customers, the manufacturing know-how and our new site already selected."

David Cole, chairman of the Ann Arbor-based Center for Automotive Research, said the lithium ion battery is a proven technology with promise of reinvigorating Detroit's auto industry.

"This is the real deal. This battery technology works. The real challenge is to get the costs in line so it's competitive," Cole said. "It looks like it's absolutely key to the development of electric vehicles."

kbouffard@detnews.com (517) 371-3660