Remember the story last fall about workers at battery maker LG Chem's Holland, MI-based plant who were sitting idle? Well, the feds have investigated and the news isn't good. The US Department of Energy (DOE) released an audit earlier this month (PDF) that revealed that not a single production lithium-ion battery has been built at the plant and employees have been finding other things to spend their time doing while being paid taxpayer money.

The DOE "found that work performed under the grant to LG Chem Michigan had not been managed effectively."

After a big announcement in 2010 that the plant would open and hire over 400 people, the first batteries were supposed to start being made in 2012. Unfortunately, the plant has been sitting idle even though the company received $142 million in federal funds and was granted $175 million in tax breaks. Only half of the 400 job have been filled, and those workers were paid about $842,000 to do other things in late 2012, including watching movies and playing board, card and video games. More civic-minded workers used the work day to volunteer with Habitat for Humanity, at animal shelters and outdoor nature centers. The DOE audit came after a complaint was filed last October and reads, in part:

We confirmed the allegations. We found that work performed under the grant to LG Chem Michigan had not been managed effectively. Based on progress to date and despite the expenditures of $142 million in Recovery Act funds, LG Chem Michigan had not yet achieved the objectives outlined in its Department-approved project plan.

LG Chem, a subsidiary of South Korean electronics company LG, previously claimed that it wasn't wasting federal money by paying idle workers and would review misspent money for potential refunds to the government. LG Chem had committed to supply General Motors with batteries for the Chevrolet Volt, but that never happened. Per the DOE, "Even though the facility had produced a large number of test cells, the plant had yet to manufacture battery cells that could be used in electric vehicles sold to the public." GM has been relying on batteries built in LG's South Korea plant.

GM has been relying on batteries built in LG's South Korea plant.

The DOE audit pushed LG Chem into telling another version of the story. In a statement to Automotive News, LG Chem admitted that the audit was correct and that it was "acutely aware of the disappointment from the delays in our start of production." The Energy Department doesn't have the authority to force LG Chem to start up battery production. It is requiring the company to repay the paycheck funds since they were "questionable costs."

In 2011, Lux Research ranked LG Chem tops in the lithium-ion battery industry, but this audit will certainly put a scuff on that shine. The DOE reports basically calls LG Chem incompetent at one point:

LG Chem Michigan failed to account for the Recovery Act requirement to utilize Davis-Bacon Act wage rates for subcontractors. We found this lapse hard to understand given the emphasis placed on strict compliance with Davis Bacon as one of the Recovery Act's basic principles, a fact that was well known to industry and to responsible Department officials.

Whether LG Chem joins the list of less-than-successful ventures funded in part by the federal government – like A123 Systems and Solyndra – remains to be seen.


I'm reporting this comment as:

Reported comments and users are reviewed by Autoblog staff 24 hours a day, seven days a week to determine whether they violate Community Guideline. Accounts are penalized for Community Guidelines violations and serious or repeated violations can lead to account termination.


    • 1 Second Ago
  • 39 Comments
      RC
      • 2 Years Ago
      Meanwhile tax payer funded battery maker A123 gets sold out to China. The Obama administration needs to exercise discipline if it is to gain credibility. So far, not good.
        Joeviocoe
        • 8 Months Ago
        @RC
        Um... they are getting a refund for the salaries paid that were wasted. That is better management.
          MTN RANGER
          • 8 Months Ago
          @Joeviocoe
          Yes, LG Chem got caught and are paying back the money. So really this is not that big of a deal. Unfortunately, LG being a big company will get nothing more than a slap on the wrist for this transgression.
          brotherkenny4
          • 8 Months Ago
          @Joeviocoe
          How much was the refund?
      bluepongo1
      • 2 Years Ago
      For outrage perspective: http://motherboard.vice.com/blog/the-f-35-stealth-fighter-is-designed-for-no-one Whar outrage, Whar ?
      • 2 Years Ago
      1. GM needed to reach a certain level of units sold before they would crank up the Holland plant. 2. The DOE funds wet for "training" and not for salaries. Their current wages are only from LG Chem and not the taxpayer.
      Rotation
      • 2 Years Ago
      I dont like it when these companies are gaming the system. I'm less annoyed by Solyndra or such that actually tried to make stuff and failed than companies who just took the money and faked everyone out. When the government is trying to create some economic momentum, it'd be great if companies didn't undermine the efforts by packing the money up and shipping it overseas to fund plants there.
        2 wheeled menace
        • 2 Years Ago
        @Rotation
        It'd be great if our government could actually vet these companies better before investing. But it's not their money on the line, it's yours. That's the problem with mixing government with business.
          Rotation
          • 8 Months Ago
          @2 wheeled menace
          LG Chem is a good company. Solyndra wasn't a bad company, their problems were mainly that China got hugely into the solar panel subsidy business. A123 turned out to have problems with their business, but I don't think those would have been apparent in vetting. In short, sometimes the problem isn't vetting.
          brotherkenny4
          • 8 Months Ago
          @2 wheeled menace
          Check out the success rate for Bain Capital. Far lower than the US government success rate. You have to realize that the bad news is way overblown because it is the government. But what percent of this project did you personally pay for? Was it a buck or a dime? Did you even spend a dime? I doubt you have more personally invested in this project than you have accidentally dropped on the ground and lost in the last few months. People need to get some perspective. Have we spent more on losing companies for tech that would replace oil than we have spent on one month of operations in Iraq and Afghanistan? No.
          EZEE
          • 8 Months Ago
          @2 wheeled menace
          I know, solyndra was a great company. Purely innocent in its deals and way it went down. Meanwhile, from multiple sources....: When it was completed at an estimated cost of $733 million, including proceeds from a $535 million U.S. loan guarantee, it covered 300,000 square feet, the equivalent of five football fields. It had robots that whistled Disney tunes, spa-like showers with liquid-crystal displays of the water temperature, and glass-walled conference rooms. I want a robot that whistles Disney tunes....
          Marco Polo
          • 8 Months Ago
          @2 wheeled menace
          @ Rotation I agree. Innovative technology is a high risk investment area. The US governments record in the last 5 years has been better on average, than private enterprise.
      Pandabear
      • 2 Years Ago
      Did they find out why they didn't start the production? Is it because of quality / reliability issue? or did they decide it is not worth doing?
      brotherkenny4
      • 2 Years Ago
      "In 2011, Lux Research ranked LG Chem tops in the lithium-ion battery industry, but this audit will certainly put a scuff on that shine." Not likely. In the business world people know what reality is, and it is not some opinion spun up by self important judgers from a research group. LGChem is doing very well and making money and that won't change even if they never make battery one for the Volt. Someone else will buy that capacity. Spin jobs are typical only in the fluffy world of "NEWS". Our "NEWS" is owned by oil.
      EVSUPERHERO
      • 2 Years Ago
      LG Chem and A123 clamor after OEM contracts. The car manufactures then demand such cheap prices that companies like A123 and LG Chem cannot stay in business. What a great way to make sure EV's never become mainstream.
        Rotation
        • 8 Months Ago
        @EVSUPERHERO
        LG Chem is not going out of business any time soon.
        brotherkenny4
        • 8 Months Ago
        @EVSUPERHERO
        A123 is no longer at risk either. No one in the US will make any money, but we'll still get batteries. As always, the US is okay at developing products, but if that product threatens any current markets it gets killed. The Koreans and the Chinese don't care one bit about oil and the oil industry, but everyone in the US does. We prefer to send our sons and daughters to die on foriegn soil for the benefit of a single industry, rather than use muscle and brains to build a better future.
      Giza Plateau
      • 2 Years Ago
      Gangnam style : )
      carney373
      • 2 Years Ago
      If LG Chem HAD obeyed Davis-Bacon it would have wasted even MORE taxpayer money by paying its workers not to work at artificially high union-dictated wage levels.
        brotherkenny4
        • 8 Months Ago
        @carney373
        Technically they did obey davis-bacon, they didn't want to, but they did.
      brotherkenny4
      • 2 Years Ago
      "Based on progress to date and despite the expenditures of $142 million in Recovery Act funds, LG Chem Michigan had not yet achieved the objectives outlined in its Department-approved project plan." The project is not over, yet they were criticized for not acheiving the goals that are not yet scheduled to be completed. Seriously it looks like the DOE is doing a hacket job on itself to get at LGChem, and to make the GOP senators happy. Americans are a very sick people capable of harming themselves for their masters pleasure. Thank you sir may I have another.
      Dave D
      • 2 Years Ago
      LOL People who take this seriously have never worked for the gov't before. When I was a co-op at IBM I was working on a defense project and they decided some goofy thing about the project not being funded so they put us on some goofy "work code" like 1087 or some such crap and made us sit in our offices and NOT WORK while they paid us until they figured out if the program was going forward. I got bored and tried to go down to the lab and do some work and they told me I'd get fired if I went in the lab....go back to my desk and read a manual or something. I swear to God, on my children's souls this happened. I was so stunned I started doubting if up was really up and down was down or if I was imagining that too! I learned real quick that when gov't money is involved, logic, common sense and all that crap have left the building.
        mikeybyte1
        • 8 Months Ago
        @Dave D
        Some businesses operate the same way. Consulting for example. You can be put "on the bench" and given busy work to do until the next client contract or implementation comes along. Sit too long on the bench and you may get laid off. But I used to be in a position where I would be idled for a few weeks or even months until we signed our next big deal. So it's not just government money.
        Peter
        • 8 Months Ago
        @Dave D
        Yeah, not very surprising
        • 8 Months Ago
        @Dave D
        This is not just a gov problem, it's a large company problem. I'll admit I've never been paid to do nothing but the incompetence and waste in a large company is staggering.
      Roy_H
      • 2 Years Ago
      When the original plans were made, the market for these batteries was expected to be much larger. The Volt was targeted at $30k and if this price had been achieved, then the production of 40k to 60k per year would have been met. There was also expectation that Korean made batteries would be sold to some European companies, but most notably for Tata motors Indica EV being built in England. What happened was that the production in Korea was more than sufficient for the market as it developed, so the Holland plant was not required. Of course Volt production was also hurt by the massive anti-Volt campaigns by Fox News, Limbaugh, and the Republican Party. Fortunately that rhetoric seems to have subsided and if GM can get the costs down (and expand the Volt line to include an SUV), then the demand for batteries would increase and the Holland plant would finally be productive. Bad as it looks, I don't blame LG Chem for taking the line of least resistance, and I hope the investment will soon prove worthwhile.
        mikeybyte1
        • 2 Years Ago
        @Roy_H
        All good points, however LG Chem should have been much more upfront and not taken the money if it was not being used as intended. Glad to hear they are paying it back.
        Marcopolo
        • 8 Months Ago
        @Roy_H
        @ Roy_H '' Volt production was also hurt by the massive anti-Volt campaigns by Fox News, Limbaugh, and the Republican Party'' I'm a huge Volt fan ! I have been since the original concept car. But, I don't think the anti-volt campaign made much difference to the Volt's market acceptance. The GM Volt was never designed to be a cheap EV. The Voltec drive-train is complex and expensive to produce. It time, and as sales increase, the Volt will become marginally more affordable, but it will never be a cheap economy car. (But it's already cheap to run!).
        Ford Future
        • 8 Months Ago
        @Roy_H
        Yes, if the Volt went for $30,000, I'd be driving one today, absolutely.
          EZEE
          • 8 Months Ago
          @Ford Future
          And if the rebate was still in place, it would be $22,500 Why not lease? Great deals. Amazing, really...
    • Load More Comments
    Share This Photo X