Automotive News Reports that GM Will Buy Battery Supplier Cobasys

By Chris Haak

06.06.2008

According to three sources cited by Automotive News today, GM is nearing a deal to buy battery supplier Cobasys. Cobasys, a joint venture between Chevron and Energy Conversion Devices, supplies GM with batteries used in its mild hybrid vehicles (the Chevrolet Malibu Hybrid, Saturn Aura Hybrid, and Saturn Vue Hybrid).

It was revealed last week that a quality control glitch at Cobasys in the past year resulted in leaking batteries that had to be recalled in approximately 9,000 2007 model year hybrid vehicles. The 9,000 replacement batteries were diverted from the production line for new GM hybrids, causing GM’s hybrid sales to be even more abysmal than they would have been otherwise. GM might offer more hybrid models than anyone else, but they are selling them in the low four figures per quarter at this point.

Many automobile manufacturers have been partnering themselves with battery suppliers to ensure an adequate supply of the high-capacity batteries for their future hybrid needs. While many of those partnerships seemed to be done for more strategic reasons, this likely deal is probably more of a reaction to the quality, financial, and ownership issues that Cobasys has been struggling with for the past several months.

The two companies that own the joint venture have been in arbitration as early as the early part of 2008, disputing such things as financial support and the approval of a budget for 2008. However, the partners notified the arbitrator set to rule on their arguments that they had entered discussions with a potential buyer. The deadline to close the agreement with the unnamed buyer (unnamed at least in regulatory filings) has been extended seven times.

According to these same regulatory filings, Cobasys is losing increasingly more money; it lost $76 million in 2007 and expects to lose between $82 and $88 million this year. Cobasys and GM have an interesting history; GM was one of the venture’s founders and had previously held Chevron’s stake; it later sold that stake to Texaco, which of course later merged with Chevron in 2001. This time, however, GM would buy the entire company and not just the half that it had owned before.

For its part, Cobasys is saying that it has the capacity to not only increase production of the batteries that GM’s current BAS (belt-alternator-starter) hybrids use, but would also enhance GM’s product development capabilities and allow the company to sell Cobasys batteries to other companies.

GM’s hybrid ambitions are far larger than their current size, so although the troubles that the company had been having with Cobasys batteries hadn’t even really caught the media’s attention until the past week or two, the loss of Cobasys as the battery supplier for most of GM’s hybrid products would deal a blow to GM’s efforts to get its name into consumers’ minds when they are searching for a fuel efficient car. However, GM has already stated that their next-generation mild hybrids will use lithium ion technology (which means higher capacities in a smaller battery size) starting in 2010. Without knowing the company’s specific plans, it seems like a Cobasys purchase is almost a short-term fix instead of a longer-term solution, since the older NiMH technology in the Cobasys-powered mild hybrids will be obsolete soon. Hopefully GM will be able to leverage the production capacity and knowledge base of Cobasys for next-generation battery technology and get more than just two years’ worth.

COPYRIGHT Autosavant.net – All Rights Reserved

Author: Chris Haak

Chris is Autosavant's Managing Editor. He has a lifelong love of everything automotive, having grown up as the son of a car dealer. A married father of two sons, Chris is also in the process of indoctrinating them into the world of cars and trucks.

Share This Post On

2 Comments

  1. What else can GM do in this cae? They have to protect their supply of this important part, so the turmoil over at Cobasys has forced their hand. They have to buy the company to save it from itself.

  2. Poor GM. They have to spend time and money propping up a company that supplies batteries for a lousy hybrid system that they now know will be nowhere good enough for the future market, but it’s something they’re stuck with on the production cars for awhile.

Submit a Comment

Your email address will not be published.