A123 Inks Deal to Develop Battery Cells for GM Electric Car

A123 Systems just landed a promising deal with General Motors to co-develop the battery cell for the automaker’s Chevrolet Volt line of electric cars and other vehicles. GM Vice Chairman Bob Lutz made the announcement yesterday during a speech in Michigan.

Under the deal, Watertown, MA-based A123 will co-develop the lithium-ion battery for GM’s E-Flex electric vehicle architecture (on which the Volt is based). The companies are not disclosing the exact terms of the arrangement. But, says Ric Fulop, an A123 founder and vice president of business development, “It’s a significant deal…We are working together with GM to develop a very special product for the Volt.”

The stakes are growing in the market for alternatively fueled cars. So far, GM and most other automakers have been left in the dust by Toyota, maker of the popular Prius gas-electric hybrid. In an attempt to catch up, GM is racing to offer cars that rely mainly on electricity for power (a conventional engine serves as backup when battery power is not being tapped) and whose batteries can be charged by plugging them into a standard outlet. GM first demonstrated its E-Flex electric vehicle architecture in the Chevy Volt concept car (pictured above) unveiled earlier this year, and Lutz said in his speech that GM hopes to offer a car based on the Volt technology by late 2010.

An affordable, safe, high-powered, long-lasting lithium-ion battery is key to GM’s plans. Developing such batteries is the forte of A123, whose technology is based on a nanoscale material developed at MIT. “It’s much safer chemistry, and it has much better life than first-generation lithium ion,” says Fulop. “These batteries last better than 10 years, over 7000 cycles of use.” The company already makes batteries for products such as power tools and jet-engine starters, he notes. “We’re now focused on batteries to help drive the electrification of transportation.”

A123 is one of the most talked-about energy companies in the Boston area. Founded in 2001, it has more than 500 employees—half of whom have been added this year—and reports raising more than $100 million in private financing. Its investor list includes General Electric, MIT, North Bridge Venture Partners, Procter and Gamble, Motorola, Qualcomm, Sequoia Capital, and YankeeTek, among others. Chair of the board is Sycamore Networks founder Desh Deshpande. Board observers include noted venture capitalist Michael Moritz of Sequoia, an early backer of Google and Yahoo.

Some other good news for GM and presumably A123: Lutz’s announcement came on the same day that the Wall Street Journal reported that Toyota was being forced to delay the launch of a new line of hybrids that tap lithium-ion battery technology.

Bob is Xconomy's founder and editor in chief. You can e-mail him at bbuderi@xconomy.com, call him at 617.500.5926. Follow @bbuderi

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