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GM to build Chevy Volt batteries

LG Chem is chosen to supply lithium-ion cells for a GM battery plant in Michigan, as the automaker decides it's "getting back in the battery business."

General Motors has decided to manufacture its own battery packs for its new electric vehicle, the Chevy Volt.

"GM is getting back in the battery business," CEO Rick Wagoner announced Monday.

The company also announced Monday that it has chosen LG Chem to provide the lithium-ion cells for the battery packs GM plans to manufacture.

GM announced in September that it had chosen a battery supplier, but would not reveal which company that was. LG Chem and A123Systems have long been involved in the development of the lithium-ion cells for the Volt's E-Flex electric drive train. While some speculated on other companies getting the contract, it should be no surprise that one of the developers was chosen to be the supplier.

Monday's announcement follows mixed December news on the Chevy Volt's progress. It was reported that because of the financial crisis facing the company, the plant for the Chevy Volt engine may be put on hold. GM followed that news up with an announcement that bringing the Volt to market is one of the company's highest priorities.

GM's Chevy Volt. GM

Batteries have long been the technological hurdle in developing electric cars, the major showpieces for many car companies at this year's North American International Auto Show in Detroit.

Initially, GM had planned to purchase the battery packs--as well as the cells--from an outside supplier, but eventually it "decided that strategically it's in the company's best interest to move into the pack business," said Bob Kruse, GM's executive director of North American Engineering Operations.

The planned plant will manufacture the T-shaped battery packs for the Chevy Volt, which GM plans to make available by the end of next year. The Volt runs on batteries for 40 miles and then an on-board internal combustion engine runs a generator to recharge the batteries.

GM also tested batteries from A123 Systems, which lost out to LG Chem as a supplier. Kruse said that A123 Systems is in consideration for future work.

Construction of the plant is contingent on GM receiving tax incentives from the state of Michigan to build the facility, Kruse said. Right now, most battery production is done in Asia.

"I think there's an opportunity to create a supply base here in the U.S. but it's going to require some government leadership to say this is strategic," he said.

In tandem with the announcement, GM has also signed a deal with the University of Michigan to open a battery lab in the state. It will be the largest battery lab in the U.S, according to GM.

Automakers are able to work on low volumes of electric cars, but the industry lacks enough skilled personnel to manufacture on a large scale, said Anne Marie Sastry, a professor at the University of Michigan.

CNET News' Martin LaMonica contributed to this report.