NCPA - National Center for Policy Analysis

Federal Grant to Battery Cell Maker Squandered

February 19, 2013

An Obama administration grant for a South Korean advanced battery maker to scale up production in the United States did not yield any results despite $142 million in funding. The Holland, Michigan, factory slated to build the battery cells is owned by LG Chem Ltd., a subsidiary of LG Corporation. Instead, the LG Company used federal funds to pay idle workers, says the Wall Street Journal.

  • To avoid layoffs, the LG Chem factory paid idle workers $1.6 million to play board games, watch movies and volunteer at local animal shelters during regular work hours.
  • The plant was half-funded by a government grant because it was estimated to add approximately 440 jobs building battery cells for General Motors' Chevrolet Volt.
  • President Obama attended the groundbreaking ceremony and heralded the plant expansion as the future of America and a stellar example of private sector growth.

Today, the factory employs 150 workers, some of whom are hourly employees and are furloughed one week a month. LG Chem continues a trend of federal grants for alternative energy being wasted at taxpayer expense.

  • Solar panel maker Solyndra filed for bankruptcy in 2011 after receiving federal funds.
  • A123 Systems is another recipient of federal funds that filed for bankruptcy after receiving about $250 million.
  • Still, President Obama calls for continued efforts to invest in alternative energy.

Kathleen Hogan, the Department of Energy's (DOE) deputy assistant secretary in charge of the $2 billion grant program, said in a written response that the LG Chem funding was part of an initiative to grow the manufacturing sector in the United States. She also said that the electric car industry has not grown as previously anticipated but is confident that it will continue to expand its market share.

A DOE report found that LG Chem had planned to move five production lines to Michigan but has no money to move the remaining two because it failed to account for prevailing wage requirements during the construction process. The result is financial losses for LG Chem on the production of battery cells for the Chevrolet Volt, the sales of which have been lower than hoped.

Source: Ryan Tracy, "U.S. Grant Funded Workers' Play at LG Chem Factory," Wall Street Journal, February 13, 2013.


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