Obama's $2.4 billion electric car bet

Posted by: David Welch on August 5, 2009

At a time when the public is growing increasingly tired of government handouts, bailouts and rescues, the Obama Administration goes and hands out $2.4 billion for electric car and hybrid technology projects. This could be money poorly spent, since other like-minded programs such as President Clinton’s Partnership for a New Generation of Vehicles and another Bush-era program for fuel cells yielded little in the way of fuel saving vehicles driven by an actual car buyer.

But you know what? This is still something that needs to happen. Unfortunately, American industry has ceded the lead in developing hybrids, electric cars and the needed lithium-based batteries that will help them go. Even though General Motors led the way with the EV1 electric car, they fumbled away that lead. Japanese and Korean companies have developed expertise in batteries.

The $2.4 billion will be spread over 48 different projects in more than 20 states as part of the American Recovery and Reinvestment Act. Michigan got the biggest slug of cash, with $1 billion of the money going to the state’s companies and universities. The cynical view says that Michigan’s mostly Democratic voters are getting payback for helping to pave Obama’s road to the White House. Perhaps it is, in part. But let’s face it, that’s where the automakers and their parts makers are located. That’s where the R&D is being done.

Johnson Controls and A123 will get $550 million to establish their beachheads for high-tech battery development. The Big Three will receive more than $400 million. Compact Power and Dow Kokam, a joint venture between Dow Chemical and Korean battery maker Kokam, got a total of $300 million.

We’ll see what comes from the money. But at least one of them, the Dow Kokam venture, is going to directly set up a lithium-polymer battery plant and create jobs. The joint venture will build a plant near Dow’s headquarters in Midland, Mich., that will employ 800 and start making lithium polymer batteries for electric vehicles next year. Dow wants to sell to Smith Electric Vehicles, which sells fleet trucks to the likes of UPS, FedEx and Coca-Cola. But Dow is also talking to major automakers.

Dow and Kokam will get $161 million from the government. George Hamilton, Dow’s vice president for government markets, says the grant will help mitigate the risk for the companies to invest in advanced batteries. And that’s where the program can kick start development. With hybrids selling to just 4% of car buyers, any bet on electric cars is risky. But if the government can step in, it could help American industry get back in the game.

Reader Comments

James S. Klich II

August 5, 2009 8:55 PM

Smart move for the United States and a idea.

Peter

August 5, 2009 8:56 PM

And not a minute too soon as the oil racketeers gear up for another raid on world capital.

OladapoShobowale

August 5, 2009 10:41 PM

America lacked the will to make the transition from gas guzzlers to electric powered cars. This perhaps explains the failure of efforts in the past. Obama's plan, I hope, was preceded by honest assessment of the factors that assured failure in the past and a concomitant plan of apt responses to ensure success. The clean/alternative energy project is critical to the political and economic future of America, and it'd be foolhardy to adumbrate its relevance by labeling as 'just another government handout'

Jazz4

August 6, 2009 12:38 AM

The author says that $2.4 Billion to develop Hybrids, Electric car and Lithium Ion batteries " could be money poorly spent", I say hogwash. This is a pittance. Why doesnt the Government do even more, like cutting the flab off a $600 Billion yearly price tag of the Defense budget, cut a $100 billion and improve the lives of the people rather than make weapons of war

Karlheinz L

August 6, 2009 4:15 AM

I like this move and wish America all the best. The right step - nearly too late.
Long term thinking against short term profit, that`s why the Japanese, Chinese and Koreans are ahead of the US & Germany(my home country).

Tim

October 22, 2009 9:08 PM

Jazz4...What would you rather have? A battery powered defenseless climate change friendly commuter, or a technologically advanced tommy gun to fight the barrage of suicide bombers who desires your head on a stick? I'm fairly certain most intelligent people know the correct, and safe answer.

Tony

October 26, 2009 7:11 PM

Where can I obtain a list of each company that got money and how much each company got?

grupa jurgena

March 15, 2010 5:09 AM

Welcome Jurgen group lost money on research battery dead end. The cards are dealt AS is in the hands of Jurgen group. It is the flash, at which the world is waiting. We look forward to discussions with the global car industry
It is no longer dreams! Jurgen

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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