Federal Audit: LG Chem Wasted Taxpayer Money

  • Credit: Argonne National Laboratory

This is the Environment Report. I’m Rebecca Williams.

Community leaders in Holland, Michigan are trying to stay upbeat about the future of the battery industry they’ve worked so hard to attract.

But the past week has been rough for advanced battery maker LG Chem. A U.S. Department of Energy audit reported the company likely wasted more than a million dollars in grant money. Lindsey Smith has more:

The audit is just… man, it’s bad.

The federal government paid for half of the $300 million price tag to build the plant. But so far, it hasn’t made any batteries. Instead, the audit found the company paid workers to clean the plant, volunteer at non-profits like Habitat for Humanity. Sometimes they watched movies or played cards.

In a written statement, LG Chem agreed with the findings and paid more than $800,000 back to the government that it used to pay workers.  The report says LG Chem failed to move production to Michigan from South Korea. But it doesn’t appear that the government can force LG Chem to do that anyway.

LG Chem won’t do any interviews.

So I met up with Holland Mayor Kurt Dykstra at his office in City Hall. Above a large family portrait, I spot a picture of him at what I thought was the inside of the LG Chem plant.

“Yeah, October of 2010 we were invited by the president of LG Chem as well as the chairman of LG to visit Seoul. ‘Oh so this isn’t at the plant?’ No, this is in South Korea.”

Holland made a pretty big effort to attract the plant here. It actually expanded the city limits to fit the sprawling plant in its borders.  The city helped pay for road, sewer and utility upgrades to the plant.

“We recognize that along the way there will be significant bumps and this certainly is one of them.”

Still, Dykstra and others in Holland aren’t giving up on this industry. Just a mile or so down the road; Johnson Controls is making these batteries. Between that factory and other suppliers in the industry, there are about 400 jobs in the Holland area. There used to be zero.

Sam Jaffe is an energy storage analyst with Pike Research.

Like LG Chem, he says there’s a number of advanced battery plants in Japan, South Korea and China that are running under capacity or not at all.

“These factories will be producing batteries eventually.”

In most cases, he says these plants were subsidized by governments with the expectation that the demand for electric cars would surge. That hasn’t happened. And the big problem is cost.

“It’s hard for an individual consumer to buy a Chevy Volt for $40,000 when they can get a Chevy Cruze for $25,000.”

Jaffe estimates it costs GM more than $12,000 just for the battery in the Chevy Volt. The LG Chem plant in Holland was supposed to supply batteries for the Volt.

Jaffe says the problem is sort of a catch-22. Batteries can’t be made super cheap because the demand isn’t high, and the demand isn’t high because the cars aren’t very affordable.

Jaffe sees a tipping point on the horizon… a point where the cost comes down enough that demand for cars or other uses for these batteries surges.

He says Holland’s two anchor battery manufacturers; LG Chem and Johnson Controls are both very healthy companies that have plenty of capitol.

Jaffe imagine that when the market does pick up, even if it is five years from now, Holland will be in good shape to take advantage of the upswing.

For the Environment Report, I’m Lindsey Smith.