DOE confirms LG Chem battery plant workers were paid not to make Chevy Volt batteries

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.