By Kim Yoo-chul
Staff Reporter
LG Chem, Korea's biggest chemical company by sales, Tuesday said it will provide the struggling General Motors (GM) with lithium-ion batteries for its electric vehicle the Chevrolet Volt.
Under the exclusive deal, LG plans to supply the batteries over five years starting next year, a company spokeswoman said.
However, she declined to comment over the value of the deal.
Industry watchers and analysts said LG is forecast to get some two trillion won or $1.5 billion as it is expecting the U.S. carmaker to sell some 300,000 Volts during the period.
LG is planning to invest one trillion won in its battery businesses for eco-friendly electric and hybrid electric vehicles by 2013, according to company officials.
Shares of LG Chem, however, failed to significantly rise on the nation's main bourse, adding just 1.03 percent to close at 78,800 won on the Korea Stock Exchange.
The deal comes after GM Chairman Rick Wagoner said the biggest U.S. automaker will open battery production in southeast Michigan for its upcoming Chevrolet electric car.
It will be the first facility to be operated by a major U.S. automaker.
As part of an advanced battery development strategy to bring the Volt to market by 2010, GM is expected to use an existing company facility and hopes to disclose the site by June, this year, with the approval of U.S. and Canadian governments.
As part of the transformation efforts toward fuel-efficient vehicles, GM is raising its bet on electric cars as the company revamps its business with $17.4 billion in emergency loans promised by the Canadian and U.S. governments.
But industry watchers weren't wholly welcoming the deal and said GM needs more time to get the Volt onto the right track.
"Although lithium-ion batteries pack more energy than the traditional nickel-metal hybrid power sources now found in hybrids like Toyota's Prius, they would not satisfy most consumers due to prices," a high-ranking industry source told The Korea Times.
Lithium-ion batteries hold less than half of the energy of gasoline as measured by weight.
In a note to clients, Goldman Sachs & Co. said the deal won't significantly boost profits of LG Chem in the short-term as it expected the company to spend 200 billion won on facilities year-on-year.