LG Chem unit vies for Chevy Volt, sees big market opening

By Kevin Krolicki and Jui Chakravorty

DETROIT, July 22 (Reuters) - A subsidiary of Korea's LG Chem Ltd. (051910.KS) expects a still-emerging market for electric cars to broaden demand for its lithium-ion batteries and generate up to $1 billion in sales over the next decade.

Troy, Michigan-based Compact Power Inc. is one of two groups bidding for a contract to supply advanced battery packs to one of the most important development projects at General Motors Corp. GM.N, the plug-in hybrid Chevy Volt.

GM is designing the highly anticipated Volt to run 40 miles on battery power alone, reducing or even eliminating the need for drivers to fuel up an on-board gas-powered engine that can be used as a backup power source.

As GM races rival Toyota Motor Corp. (7203.T) to offer the first such mass-market electric vehicle, LG Chem's Compact Power unit is ready to supply all of the lithium-ion battery cells needed for the planned 2010 production of the Volt, the company's chief executive said.

"There's a lot of momentum now behind the electrification of the vehicle," Prabhakar Patil, CEO of Compact Power, told Reuters in an interview. "If it succeeds, it's going to be a game-changer."

Environmental advocates have been pressing automakers to roll out "plug-in" hybrid vehicles that would be capable of running on electricity for short distances and recharging at a standard electric outlet.

A study released last week by the National Resources Defense Council and the Electric Power Research Institute said the widespread use of plug-ins has the potential to cut greenhouse gas emissions without overtaxing the power grid.

In addition to GM and Toyota, Ford Motor Co. (F.N) is also working on a plug-in vehicle it expects will be ready in the next five to 10 years, the automaker's chief executive said earlier this month.

LG CHEM SEES $1 BLN SALES OPPORTUNITY

Patil said he expected potential lithium-ion battery sales for LG Chem to the emerging transportation market of between $500 million and $1 billion over the next five to 10 years.

That would include sales to plug-in hybrid vehicles, like the GM Volt, commercial trucks used for stop-and-go city deliveries and two-wheelers, he said.

Patil said lithium-ion batteries -- long used in computer laptops, cell phones and digital cameras -- would be ready to power cars in the next several years.

Compact Power is one of two companies selected by GM to work on parallel battery development programs for the Volt, in a high-profile announcement made at the automaker's shareholder meeting in June by CEO Rick Wagoner.

Under the program, Compact Power will test a suitcase-sized lithium-ion battery pack it has designed to power the Volt, integrated several hundred individual paperback-sized battery cells supplied by its parent company LG Chem.

On a separate competitive track, a division of German auto supplier Continental AG (CONG.DE) is working to integrate batteries supplied by Massachusetts-based A123 Systems.