GM, LG to jointly develop electric cars

DETROIT Thu Aug 25, 2011 1:23pm EDT

DETROIT (Reuters) - General Motors Co and LG Corp have struck a deal to develop electric cars together, a first-of-its-kind alliance between the top U.S. automaker and a leading Korean conglomerate that represents a major bet on battery technology.

LG Corp's LG Chem Ltd currently supplies the lithium-ion batteries that power GM's Chevrolet Volt and Opel Ampera plug-in hybrids which debuted in late 2010.

Under the agreement signed on Wednesday by GM Chief Executive Daniel Akerson and LG President Juno Cho, the two companies said they would design a range of electric vehicles that would be sold in markets around the world.

The agreement does not involve an exchange of equity between the two sides.

Under Akerson, GM has been pushing to expand its lineup of electric vehicles on the view that the high-profile launch of the rechargeable Volt has given it a lead in a key area of technology expected to be central to gains in fuel economy.

Earlier this month, GM confirmed it was developing a plug-in hybrid for its luxury Cadillac brand. The automaker is also developing an all-electric small car that would be sold globally, people with knowledge of that effort said.

GM and LG last year collaborated to build a demonstration fleet of Chevy Cruze small cars that were used at the G20 economic summit in Seoul.

Dozens of GM and LG engineers have already begun work together in the United States, GM spokesman Kevin Kelly said.

Over time, GM engineers will also be dispatched to work at LG facilities in South Korea, he said.

"This is a strategic development for LG and we fully support GM's goal to lead the industry in the electrification of the automobile," LG's Cho said in a statement.

GM, which was saved by a U.S. government bailout in 2009, faces stiffer U.S. fuel economy regulations that double current standards to about 55 miles per gallon by 2025.

GM said the partnership would allow it to fast-track the development of more electric vehicles than it could develop on its own.

The announcement of the tie-up comes just three days after Ford Motor Co and Toyota Motor Co said they would collaborate to develop hybrid trucks and SUVs.

"We're going to see relationships like this develop. The auto industry is changing and the manufacturers need to change with the changing technology," said Dennis Virag, president of the Automotive Consulting Group in Ann Arbor, Michigan.

"Electric vehicles are going to have to play a role in the really draconian cuts that have to made in terms of fuel consumption," he said.

The LG partnership was negotiated by GM Vice Chairman Steve Girsky, a former Wall Street banker who has been put in charge of the automaker's venture investments and partnerships.

The Volt is built at a GM plant near Detroit with batteries supplied by LG Chem. The Volt is sold in North America and the Ampera in Europe.

GM shares were down 3 cents at $22.34 on Thursday afternoon on the New York Stock Exchange.

(Additional reporting by Deepa Seetharaman, editing by Gerald E. McCormick and Matthew Lewis)

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