Production delayed indefinitely at LG Chem's Holland plant
LG Chem Michigan Inc., which had planned to start production of lithium-ion battery cells in its new Holland plant this year for electric vehicles, has confirmed it is not in operation and that it has been “extending and expanding rolling furloughs” of employees since late August.
Construction of the plant began in 2010 after the federal Department of Energy selected it for a $151 million grant under the Recovery Act Award for Electric Drive Vehicle Battery and Component Manufacturing Initiative. LG Chem, a Korean battery manufacturer, also invested $151 million or more of its own money in the plant. It was expected to create 300 to 400 new jobs by 2013 and also received investment incentives from the state and local governments in the form of tax credits and exemptions.
LG Chem Michigan provided a statement to the Business Journal today but would not answer any questions. The statement is in response to broadcast reports about the lack of production at the plant.
“Taxpayer money has not been wasted, because when the market demand justifies production, the facility will be utilized. More than 1,000 construction jobs were involved in building the facility, and 200 company jobs have been created, adding a solid boost to the local economy. LG Chem has the strongest motivation to operate the plant, because it has invested more than 50 percent, over $150 million, of the cost to construct the facility, so it will utilize the plant when the time is right,” according to the statement.
Almost 200 employees are working the “rolling furloughs,” which is 75 percent of their normal work schedule, and they are still reporting to the plant for their scheduled hours even though the plant is not in operation, according to the company.
The LG Chem statement said employees are still reporting to work at the plant, because “LG Chem feels a duty to take care of the people and to keep them on the team, so they can be ready for production. The company will not use (Department of Energy) grant money to pay for any idle time. It will review prior billings, and if any has been used, then that money will be refunded to the DOE.”
The employees are engaged in maintenance and cleaning of production equipment and the plant “and in process documentation efforts to ensure they supply an excellent product to their customer.” The high-tech clean room at the plant requires almost constant cleaning “to maintain proper conditions.”
At times, according to the statement, employees “have engaged in team-building activities and some labor donation to aid nonprofit groups in the community.”
As to when production will actually begin, LG Chem said “the market will indicate when it is necessary to begin production. At this time, LG Chem Michigan is not able to make a definitive projection of how long the rolling furloughs may last because that will ultimately depend on market conditions and consumer demand.”
The company has a “strong business relationship” with GM “and that will continue. Companies make modifications to their production schedules based on demand and this instance is no different.”
The plant’s production was intended for the all-electric Chevrolet Volt, but that car has not had the level of sales GM anticipated, and planned production has been reduced.
Another electric vehicle battery company, A123 Systems in Ann Arbor, filed for bankruptcy in mid October, and it was the recipient of a $249 million federal grant. It is now attempting to sell its automotive business assets to Johnson Controls, which also has a plant in Holland producing batteries for the electric Ford Transit.
LG Chem Michigan said that when its Holland employees are on the unpaid furloughs, they are eligible to receive unemployment benefits, and their regular health insurance benefits will continue as the company is paying the employees’ share of those premiums. They are, in effect, receiving about 85 percent of their regular monthly compensation, said LG Chem.