GE yesterday disclosed having made its sixth equity investment in lithium-ion battery manufacturer A123Systems, a developer of batteries for hybrid cars and other electric devices.
The company, started in 2001, has received investment backing from GE, Motorola, Qualcomm, Procter & Gamble's Duracell division, Massachusetts Institute of Technology and private equity firms Alliance Capital, Sequoia Capital, North Bridge Venture Partners, CMEA Ventures, FA Technology Ventures and OnPoint.
A123, in collaboration with Germany's Continental AG, is in the race against South Korea'n LG Chem's Compact Power to supply next-generation lithium-ion batteries that it is co developing with General Motors for its forthcoming electric car Chevy Volt.
In August this year, just two months after declaring its intention to bring out its electric vehicle, the Chevrolet Volt by the end of this decade, General Motors declared that its futuristic vehicle as being almost ready for testing after the successful conclusion of the design stage. (See: GM declares Volt ready for testing; additional electric cars in development)
However, GM still has considerable work to do on the Volt's lithium-ion battery and other technology in the two years before the car is scheduled to go on sale.
To help A123 develop longer lasting batteries, GE has now invested $30 million in A123's $102-million Series E financing, making it the battery manufacturer's largest single cash investor - at 9 per cent ownership.
The investments were made by GE Commercial Finance -- Equity, and GE Energy Financial Services, bringing GE's combined total investment in A123Systems to $55 million to enable it to develop more powerful automotive battery systems as a replacement to conventional fuels.
Its lithium ion battery technology is curently being used in BAE Systems' HybriDrive propulsion system used in the 2008 version of the Daimler Orion VII hybrid buses manufactured by BAE.
In December 2006 A123 was awarded a $15-million development contract by the United States Advanced Battery Consortium, comprising DaimlerChrysler, Ford Motor and General Motors in collaboration with the US Department of Energy to optimise its proprietary doped nanophosphate battery technology, for hybrid electric vehicles using a new higher power, faster recharging lithium ion battery system that the company had developed in 2005.
GE's support of A123 is part of GE's ecomagination initiative, the company's commitment to help its customers meet their environmental challenges while expanding its own portfolio of cleaner energy products.
In addition to receiving capital from GE, A123 is drawing on the research and technology development expertise of GE Global Research to design battery system components for automotive programmes.
The company was co-founded in 2001 by two MIT researchers, Dr. Yet-Ming Chiang, a full professor in the Materials Science and Engineering Department at MIT, who also co-founded American Super Computers in in 1987 and Sloan fellow Ric Fulop, who wanted to commercialise novel technology developed at the Material Sciences and Engineering Department at MIT. Fulop has been involved in the founding of six technology companies that have raised over $370M in industries as varied as energy storage, software, semi-conductors and wireless communications.
In 2002, shortly after the company's initial financing, the two founders identified David Vieau, who has been developing rapid-growth technology and component businesses for the last 30 years, to run their venture. Since then Vieau has led the expansion of A123 from its initial creation to currently more than 1,100 employees, and through more than $250 million in private financing.
Their company's proprietary nanoscale electrode technology is built on initial developments from MIT. The company uses nanotechnology to produce rechargeable lithium-ion batteries with a combination of greater power density, lower weight, lower cost and improved safety than other battery types, based on materials licensed from MIT.
Unlike standard lithium-ion batteries, A123's batteries are not prone to overheating. The company is a significant recipient of US Department of Energy awards for hybrid and plug-in hybrid electric vehicle batteries and is working with major automakers on 19 vehicle models, ranging from hybrids to plug-in hybrids to full electric vehicles. A123's technology is also used to supply power in portable tools manufactured by Black & Decker and DeWalt and in stationary grid applications.
''When GE Energy Financial Services invests in new venture companies, we offer much more than capital,'' said Kevin Skillern, Managing Director and leader of venture capital at GE Energy Financial Services. ''Companies that partner with GE Energy Financial Services not only receive the resources of a top-quality venture capital company, they benefit from all the strengths of GE.''
The quest for increased fuel economy is driving the electrification of vehicles. In December 2007, the US Congress tightened the 'corporate average fuel economy' standards that regulate the average fuel economy in the vehicles produced by each major automaker. The fuel economy standard increased 40 per cent -- to 35 miles per gallon by 2020. It is estimated that to meet these new vehicle efficiency standards, half of all cars must be hybrid by 2020.
The company is currently working on a 'battery range extender module' that can be installed in the spare tire well of most hybrid vehicles, to enable existing production models become plug-in hybrids capable of achieving 150 or more miles per gallon, with the option to replace a discharged battery in the module, instead of having to recharging it, to extend the range of vehicles.
GE made this investment in May this year, as A123 prepares for a $175-million initial public offering, for which it had made its regulatory filing in August, but in view of the market turmoil, it has yet to announce the date and pricing band.