Cultural Preferences Shaping Battery Business Relationships
By Michelle Krebs October 20, 2009At the first-ever "Business of Plugging In" conference in Detroit Tuesday, industry interests 
studying the development and marketing of plug-in hybrid-electric vehicles said the question of who is best to develop and manufacture batteries for plug-in hybrids for now seems to be determined by nationalistic preferences.
A panel discussing the future of development for the advanced batteries, which are critical to providing the electric-only driving distances desired for plug-in hybrids, mostly agreed specialist suppliers - not automakers - will be the best companies to develop and produce the batteries.
The differences come when talking about what role automakers will play, however.
Anne-Marie Sastry, CEO of battery development startup company Sakti3, said there is a 
"cultural aspect" to the current relationships between battery suppliers and automakers.
Sastry said while U.S. and European automakers largely seem content with the relationship typical for suppliers of conventional components, Japanese OEMs have preferred a course of attempting to "lock up" battery developers into more closely-held, exclusive business relationships.
The strategy could be seen as reflective of Japanese automakers' traditional keiretsu-type relationships with suppliers, which enlist suppliers more as close and trusted partners than simply business associates.
Sastry's company, Ann Arbor, MI's Sakti3, last summer inked a partnership deal with General Motors Corp. Although GM already has contracted with South Korea's LG Chem to make the lithium-ion battery cells for its high-profile Chevrolet Volt extended-range electric vehicle (the cells will be incorporated into battery packs assembled in Michigan), the deal with Sakti3 presumably will help GM stay on the cutting edge of battery development.
There's a "national advantage" to having battery manufacturing "on your soil" and near indigenous automakers, Sestry said at the conference, seeming to support the supplier relationship model similar to the one the Japanese automakers prefer.
Denise Gray, GM's director of global battery systems engineering, said that's the main reason GM sought to keep its initial battery development for the Volt in house and with a close partner in LG Chem. For the Volt, GM knew it had to be deeply involved with the battery developer.
"The Volt really made us think about our role," said Gray. "We recognized we have to be part of that (early battery research) solution. We had to really learn what the cost drivers were."
Gray said that although GM deemed this kind of relationship - one more akin to the Japanese model - vital while developing the first-generation Volt, once things get rolling, GM may be more open to stepping aside and letting the experts carry on.
"That's not to say we'll be in the battery business forever," said Gray. Eventually stepping aside would create an automaker-supplier relationship more resembling the kind historically preferred by the American and European makers.
But Sastry said the primary reason automakers may want to leave to suppliers the business of developing batteries is the nature of the research itself. She believes if automakers allow battery specialists to supply the batteries, automakers will have the best access to the most cutting-edge innovations. -- Bill Visnic, Senior Contributing Editor
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