Mercedes Alleges Troubled Battery Supplier May Delay Production of ML450 Hybrid

Mercedes Alleges Troubled Battery Supplier May Delay Production of ML450 Hybrid

By Scott Doggett, Contributor

Mercedes-Benz U.S. International Inc. has sued Cobasys LLC and its parent companies, claiming the battery maker isn't delivering the battery packs it agreed to build for Mercedes' ML450 Hybrid (right) and as a result the German automaker might have to delay the launch of its planned hybrid SUV.

In a lawsuit filed last week in a U.S. District Court, Mercedes-Benz said it had scheduled the production launch of its new hybrid vehicle for June 2009, and that it had a contract with Cobasys in which that company agreed to supply 100 percent of the batteries for the ML450 and would do so "in due time."

The automaker also alleges that based on the contract, its engineers began working closely with Cobasys personnel to refine the specifications for the battery pack and Mercedes-Benz and its affiliates paid Cobasys approximately $6 million in connection with the development of the battery pack.

But according to the lawsuit, Cobasys notified Mercedes-Benz many months later that its owners -- Chevron Technology Venture LLC. and Ovionic Battery Company Inc. -- "had reached an impasse as to how to fund Cobasys."

As a result, Cobasys said it would not sign a purchase order Mercedes-Benz had presented for the battery packs months after Cobasys representatives signed the initial contract with the automaker.

The suit also says that Mercedes-Benz "understands that a buyer for Cobasys has now been located, and that a sale of Cobasys is now imminent."

Cobasys builds batteries for General Motors' mild hybrid sedans and, in June, GM officials said the American automaker was nearing a deal to buy Cobasys. However, no agreement has been announced.

Trouble at the suburban Detroit battery maker slowed production last winter of three GM mild hybrids: the Chevrolet Malibu Hybrid and Saturn Aura Green Line cars and the Saturn Vue Green Line crossover. As Green Car Advisor reported, battery leakage also forced GM to recall 9,000 vehicles.

Since then, Cobasys' parent companies have been fighting over which of them is financially responsible for Cobasys, in light of the fact that the production slowdown at GM likely cost the automaker millions of dollars.

Calls to Cobasys to obtain their side of the story were not returned.

In a letter attached to the suit, Mercedes-Benz Secretary W. Lee Thurston said "there is no viable or commercially reasonable alternative source for supply which will allow MBUSI [Mercedes-Benz U.S. International Inc.] to meet its launch dates."

In a reply dated July 9 to Thurston's letter, Cobasys CEO Thomas Neslage wrote that Cobasys had stopped working because Mercedes-Benz had not paid invoices. Cobasys also denies that it agreed to produce the batteries for Mercedes, a unit of Daimler AG.

In the lawsuit, Mercedes-Benz claims Cobasys lied about the state of its business in order to keep a potential customer.

The lawsuit reads: "The intention of Cobasys' owners and their representatives on the board was to hold MBUSI as a significant customer for Cobasys in the event that a prospective buyer of Cobasys wanted to make sales to MBUSI, while avoiding any additional commitments to MBUSI in case Cobasys' buyer preferred instead to renegotiate or drop MBUSI as a customer entirely."

Mercedes-Benz spokeswoman Felyicia Jerald would not comment on the case beyond a short statement sent to reporters.

In it, she said MBUSI "remains committed to production of its hybrid vehicle and is working diligently with all of is suppliers in order to meet our goals. The hybrid battery to be supplied as agreed by Cobasys is an obvious component of this launch."

The lawsuit, she said in the statement, "became necessary in order to protect the business interests of MBUSI and prior amounts invested in our hybrid vehicle."

Scott Doggett:  is an AutoObserver.com Associate Editor.