GM and LG Energy become first recipients of new government loan for cell battery manufacturing

The joint battery venture between General Motors and LG Energy Solution is the first beneficiary of a new loan program from the U.S. Department of Energy. The latest lithium-ion battery cell manufacturing plants will be built with the aid of the $2.5 billion loan provided to GM and LG Energy.

The GM-LG joint venture, known as Ultium Cells, will utilize the loan, which is anticipated to close in the next several months, to build new plants in Ohio, Tennessee, and Michigan. To build three battery facilities together, GM and LG plan to spend more than $7 billion. August is anticipated to mark the start of operations at the Ohio facility. Operation is expected to begin in Tennessee in late 2023 and in Michigan in late 2024.

According to Ultium, the factories will bring 5,000 new high-tech employment to the United States. Ultium must provide employees with local prevailing wages and benefits packages as per the loan agreement.

"The commitments GM and LG have made to fund the Ultium Cells LLC joint venture don’t preclude the joint venture from pursuing a loan under a program designed to advance clean energy technology," GM spokesman Jim Cain said. "Assuming the loan is approved, it would have the effect of lowering the amount of capital the joint venture partners would need to fund directly. Ultium Cells will repay the loans with proceeds earned by selling its cells to GM."

The money comes from the Advanced Technology Vehicles Manufacturing (ATVM) loan program of the federal government, which was intended to provide up to $17.7 billion in federal loans but hasn't financed a new loan since 2010.

In 2009, the DOE gave one of the last automakers, Tesla, a $465 million loan to aid with the production of its Model S automobile. According to the DOE, the program has so far allocated $8 billion for goods that have helped produce more than 4 million high-tech automobiles.

"While this conditional commitment demonstrates the Department’s intent to finance the project, several steps remain, and certain conditions must be satisfied before the Department issues a final loan," the DOE said on Monday.

Government involvement in securing battery production is not new, but this is the first time the DOE will offer a loan specifically for a battery cell project under the vehicle program.

In reaction to a growing post-COVID environment, joint partnerships between automobiles and battery chemistry and cell producers have started emerging locally in recent years. To strengthen supply chains, governments in Germany, South Korea, and China have already started financially supporting local battery manufacture.

The Biden Administration's desire to safeguard its supply chain in support of its goal of having 50% of all new vehicle sales be EVs by 2030 is suggested by the revived DOE loan program.

The organization said in February that it would use $3.1 billion from Biden's Bipartisan Infrastructure Law to increase the production of batteries and component parts in the United States, strengthen local supply chains, and generate jobs.

According to the DOE, the department has requested loans totaling more than $18 billion from the vehicle program and anticipates another $5 billion in funding. Additional loans will be issued, the department added, but no date was given.