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LG gets extension on Holland battery plant expansion as plans with GM stall

Posted By: The Detroit News on January 24, 2023.  For more information, please click here to read the source article.

LG Energy Solution is getting an extension on formally entering into an agreement with Michigan’s quasi-governmental economic engine to quintuple the size of its Holland electric-vehicle battery plant just days after it first was reported that the company won’t be building a fourth battery plant with General Motors Co.

The governing body of the Michigan Economic Development Corp. on Tuesday approved the 60-day extension for the Korean manufacturer to enter into the agreement. The company couldn’t execute the agreement within the initially required 180 days because of “administrative limitations,” according to a memo from Jeremy Webb, managing director for business development projects at the MEDC, to the Michigan Strategic Fund board.

Webb added that it’s anticipated LGES will be able to execute the agreement within the allotted reauthorization timeline. It’s not necessarily uncommon for extensions to be requested, especially given the project of this size.

“The LG expansion of Holland was based upon demand that was over and above, as I understand it, what the potential partnership with GM could have yielded,” MEDC CEO Quentin Messer Jr. said during a briefing ahead of the board meeting. “We have not received any indication that there is any pullback.”

The MEDC in March approved a $10 million Michigan Business Development Program grant for LGES to invest $1.7 billion into its Holland plant, increasing its annual capacity to 25 gigawatt hours and adding 1,200 jobs. The expansion is expected to be completed in 2024.

The company received another $10 million grant, from the Jobs Ready Michigan Program, for talent recruitment and training. The project was hailed as another example of Michigan’s continued ability to attract mobility investments in the age of electrification.

But on Friday, it was revealed by sources that General Motors Co. plans to build a fourth battery cell manufacturing plant, but not with LGES. It was a sign, analysts suggested, that there was some overenthusiasm in commitment and capital expenditures around EVs and that consumer adoption, raw material shortages and affordability were causing renewed evaluation. It wasn’t clear how far that reconsideration could extend.

Messer also noted with respect to the Holland project that all agreements, once signed, have required milestones for companies to meet. Those, however, can be amended to ensure commitments happen.

GM and LGES have a joint venture called Ultium Cells LLC. The JV is operating a battery plant in northeast Ohio’s Warren and is building two others in Delta Township outside Lansing and in Spring Hill, Tennessee. Each has a more than $2 billion price tag.

GM and LG were looking at a site in New Carlisle, Indiana, for the fourth location and even received $270 million in tax exemptions for the project. But the plans, at least with LG, have been halted, though LGES in a statement said discussions are ongoing.

LGES also has a joint venture with Jeep and Ram maker Stellantis NV, NextStar Energy. The entity is constructing a $4.1 billion battery plant in Windsor, Ontario.

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