General Motors is reportedly abandoning a joint venture battery production facility. It was a joint venture with LG Chem, called Ultium. It’s been over the past year and a half since the companies announced their deal. Now the information was leaked according to Reuters, that the fourth production facility will no longer be pursued.
According to information released by Ultium LLC in Q4 of last year, the fourth battery production location of the business would be located in New Carlisle, Indiana, and come at an initial cost of $2.5 billion. However, in a comment to the press at the end of the week, GM specified that “We’ve been very clear that our plan includes investing in a fourth U.S. cell plant, but we’re not going to comment on speculation,” indicating the situation regarding the plant’s construction may be more complex than initially reported.
One significant hurdle for GM could be its current ties to LG via its battery manufacturing subsidiary Ultium. In the case that GM decides to work with another battery manufacturer, it remains unclear if Ultium could manage that plant or if it would require its own management that could, in turn, work with the new supplier; be that SK ON, CATL, or any other manufacturer. However, suppose GM will continue working with LG and establish the fourth location. In that case, the American auto giant may need to continue to work through a potentially arduous negotiation process.
Battery manufacturing
As for LG, the South Korean battery maker has yet to back away from the negotiation table and released a statement on Friday to the Wall Street Journal, saying discussions were still ongoing. As legacy automakers continue to look to expand their battery manufacturing prowess in the coming years, it is clear that the partnership model may not always be advantageous. And while many have appreciated sharing the cost of creating these numerous production locations with battery makers, it’s clear that Tesla’s more direct vertical approach also has its merits. It remains unclear if more companies will trend toward that direction in the future.
Earlier, the Detroit automaker and the South Korean company were known to build a $2.6 billion plant in Michigan, set to open in 2024. In December, Ultium said it would boost its investment in a $2.3 billion Tennessee plant that is set to open later this year by another $275 million. According to Reuters, GM said Friday it is rapidly investing to ramp up cell production with LG Energy, adding that the plants in Tennessee and Michigan are on track to open in 2023 and 2024, respectively.
