GM to pick Volt battery maker in next few months

A Chevy Volt is on display at the Plug-in Electric Vehicle Conference 2008 in Washington June 11, 2008.

DETROIT (Reuters) - General Motors Corp (GM.N) will announce a battery supplier for its all-electric Chevy Volt by the end of the summer, an executive said on Friday.

"My guess is that we'll have an announcement before the end of the summer," Tony Posawatz, the senior engineering executive heading up GM's Volt development program, told Reuters.

Two suppliers have been in the running to provide lithium-ion batteries for the Volt, a highly anticipated, rechargeable car that GM will begin making in November 2010.

The Volt is on track to become the first mass-market plug-in, and the GM battery contract has been closely watched as the first test for an emerging technology expected to generate billions of dollars in sales in the coming decade.

A unit of Korea's LG Chem (051910.KS) said last week that it was ready to supply batteries for the Volt.

German auto parts supplier Continental AG (CONG.DE), adapting battery technology used by privately held A123 Systems, is also competing for the Volt battery contract.

Posawatz, who was speaking after a presentation at Wayne State University, said GM would need to name a battery supplier in the next few months to allow time for production planning.

He said GM would probably opt to ramp up slowly with the first production run of the 400-pound battery packs for the Volt, "just to make sure everything is bulletproof."

Separately, Posawatz said GM had been approached by utilities interested in using recycled Volt batteries as a power storage system, a secondary market that could bring down the cost of the Volt and other plug-in vehicles for consumers.

For its part, GM is lobbying utilities to offer rebates or cheaper off-peak charging rates and asking for other forms of tax relief to offset development costs expected to keep it from turning a profit on the initial Volt sales.

"To make this thing a sustainable business, we have to drive it to volume," Posawatz said. "And to get there we have to work through these first few years where it's going to challenge us mightily."

Posawatz declined to comment on how much GM would charge for the Volt, saying only that the automaker was certain there was strong enough initial demand to justify a higher price.

"The nature of this technology is that it's going to be expensive, and we will not underprice this vehicle," he said.

GM is designing the Volt to run for 40 miles on a lithium-ion battery pack that can be recharged at a standard electric outlet. The car will also capture energy from braking like a traditional hybrid and feature an on-board engine that will be used to send power to the battery on longer trips.

In the future, GM could offer a battery pack with a 20-mile electric-only range to bring costs down, Posawatz said, part of an effort to cut the cost of such vehicles by half or more.

Posawatz said the Volt battery was expected to be able to be recharged in eight hours at a 110-volt power outlet and half that time at a dedicated 220-volt outlet, ensuring drivers would be able to power up at night when electric demand is at an ebb and rates are cheapest.

The Volt marks one of the first attempts to adapt lithium-ion batteries, widely used in consumer electronics, for a car, although Toyota Motor Co (7203.T) and others are pressing ahead with their own work on the same technology.

By 2010, Toyota expects to have a plug-in version of its market-leading Prius hybrid in tests with fleet operators such as government agencies and companies.

A test GM ran with driving records of thousands of Los Angeles-area drivers suggests that as many as two-thirds could finish their average daily driving without using gas in a Volt, Posawatz said.

GM wants the Volt battery to run at least 150,000 miles and last 10 years. But even after its projected life in the car, engineers estimate that the batteries would still have between 70 percent and 80 percent of their power remaining.

That opens the possibility that a utility could stitch together hundreds or thousands of recycled units to store power and send it back to the electric grid at times of peak demand, GM and supplier executives have said.

Posawatz said California utilities have been particularly interested in that prospect. "They've been very aggressive and they see the bigger picture," he said.

California-based Web search leader Google Inc (GOOG.O), a strong proponent of plug-in vehicles, has also been in contact with GM about giving the Volt a boost at its facilities, Posawatz said.

"The Google guys have come to us and said that they will put in charging stations so every employee gets a front-and-center spot," he said.

(Editing by Phil Berlowitz)