Will batteries recharge Michigan’s economy?

Ford

DETROIT — A year ago, a confident Chrysler opened the North American International Auto Show with Dodge trucks herding cattle down Jefferson Avenue.

This year, Michigan Gov. Jennifer Granholm came to Cobo on a mule.

A mule, of course, is Detroit-speak for a prototype automobile, and while Granholm’s ride boasted significantly less horsepower than last year’s methane-emitting stampede, the governor seemed at last on the right road after years of a visionless policy for Auto Industry 2.0.

The car she drove to the auto show was a Ford Focus souped up with an electric powertrain. And while Ford (NYSE:F) would not reveal who made the lithium-ion batteries that made the vehicle go, it might have been Johnson Controls-Saft. The joint venture between the U.S. auto supplier and the French battery producer made the batteries that went into Ford’s experimental fleet of plugin hybrid electric vehicles (PHEV).

The head of that joint venture, Mary Ann Wright, had some unflattering things to say about politicians last year, calling them “ignorant” and in need of education on what exactly it takes to compete with the Asians when it comes to plug-in hybrid and electric vehicle technology.

So, when Granholm buzzed in to the auto show on an electric mule last week and made a big show out of signing a bill granting battery companies up to $335 million in tax credits to make Michigan their home, was that finally government shedding its ignorance?

The answer, if you want to use the language of a 12-step program, is that government is on the way to recovery because it recognizes that it has an ignorance problem. To Granholm’s credit, she also recently kicked in more than $2.4 million in tax credits over 10 years to an Ann Arbor company called Sakti3, which is also developing lithium-ion batteries. And nobody could have called Granholm ignorant when, during the recent national spanking Detroit received in Congress and the national media, she said on “Meet The Press” that lack of government funding would mean “replacing our reliance on foreign oil with the reliance on foreign batteries, because it’s the battery that’s going to be driving the electric vehicle in the future.”

No, not ignorant anymore. But late. A couple of years ago, Michigan was notoriously a bad place for small tech startups to start up. Surrounding states like Ohio simply could offer better deals.

Michigan recognized the problem and slowly began to ramp up tax and other incentives. But it still lacked vision. Remember the “ethanol economy” that Granholm heavily promoted a year ago? That fizzled in the wake of environmental criticism and a slow realization that ethanol is, at best, a transition technology along the way to electric and, ultimately, hydrogen fuel cells.

While the Big Three, and Michigan, are incredibly happy about the eventual arrival of lithium-ion battery manufacturing for electric hybrid vehicles, that’s already old news in Asia, where there is no question of government support for the auto industry not only directly, but also through training its engineers on how to implement it.

General Motors (NYSE:GM) recently chose Compact Power, a subsidiary of the Asian LG Chem, to provide the lithium-ion batteries for its Chevy Volt. The reason, according to GM, was its U.S. competitor, A123 Systems, was still just a startup and inexperienced and, most importantly, the battery manufacturing infrastructure just does not yet exist in the United States.

Yes, did you catch that word? MSNBC’s Rachel Maddow has called it one incredibly sexy word for the coming Age of Obama. Let’s see that word again.

Infrastructure.

It’s even coming out of the mouths of GM, which appears to be ahead of the other U.S. automakers when it comes to reading the proverbial writing on the wall. Larry Burns, vice president for research and development for GM, has called for “sharing the public/private risks and rewards — possibly creating a partnership between the U.S. government, auto manufacturers and suppliers, the energy and infrastructure industries …”

What many in the U.S. Congress — and Detroit’s critics across the country — failed to grasp is that the auto industry is infrastructure and just as important to our national health and future as rebuilding crumbling bridges. And, a key part of that infrastructure involves batteries. An investment in the auto industry, in batteries, is akin Eisenhower’s launch of the Interstate Highway System. Old Dwight pictured the system as being used for national defense. Civilian use, of course, completely overshadowed the need to move missiles around.

Better batteries, stand-alone fuel cells, for our automobiles will eventually translate to better, smarter power for our homes and offices. It is directly related to new smart grid technologies that will replace our creaking, old 20th century electric power infrastructure.

Michigan is celebrating its decision to go charge up its battery industry, and it should. But the manufacture of lithium-ion batteries is not labor-intensive. There will be new manufacturing jobs coming to Detroit. However, the battery industry will be part of a global automotive economy. Asia is already a few years ahead technologically and in building the workforce necessary to maintain the new infrastructure.

Michigan is getting it. Slowly. Michigan government is working with private industry and the educational system to re-educate out-of-work auto engineers and turn them into battery engineers. Look for an announcement from Michigan in the next few months.

But, still, the race is for second place. Here’s an illustration.

Last year, Toyota had to halt production of its electric Prius because of safety issues with cobalt-based lithium-ion batteries. Without getting too technical, cobalt-based batteries are the ones that tend to go boom. However, because they already had trained battery engineers and flexible manufacturing processes, Toyota was able to stop on a dime and switch to another formula for its batteries. Toyota was able to do that because it had already made an investment in infrastructure.

So, while Michigan will not lead the herd, it at last has found its way toward the ranch. And, perhaps, the Made in Detroit brand will mean something again. At the very least, with hard work and investment, it will no longer be synonymous with the stuff that comes out the southern end of a north-going steer.

Howard Lovy has covered science, technology and business for The Detroit News and ClickOnDetroit.com and helped found Small Times, an Ann Arbor magazine focusing on nanotechnology and microsystems. His freelance work has appeared in the Wall Street Journal, Wired News and Salon.com.