The Obama administration recently allocated $2.4 billion in funds for advanced battery research and manufacturing, sparking a competition for the money among the nation's top technology firms. During today's OnPoint, George Hamilton, vice president of government markets at the Dow Chemical Co., discusses his company's proposal for DOE's battery funding. Hamilton discusses the role of government in shaping the future of the advanced battery industry. He also talks about the viability of advanced battery technology and addresses concerns about the cost of U.S.-made lithium-ion batteries.
Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. Joining me today is George Hamilton, vice president of Government Markets at the Dow Chemical Company. George, it's great to have you on the show.
George Hamilton: Monica, great being with you, thank you.
Monica Trauzzi: George, Dow is involved in what has essentially become a competition for millions of dollars in funding from DOE for the construction of a U.S. run advanced battery manufacturing facility. This has the potential to be a really lucrative business venture for whoever gets this money. What separates Dow's proposal from the proposals of your competitors, which include GM, Johnson Controls, A123?
George Hamilton: And many of those all potential customers of ours as well. Yes, we are excited about the opportunity that's being created here. We applaud the Obama administration for setting this new industry in motion which is going to help us to not only address the national security issue around dependence on foreign oil and also the issues around climate change and green, but also getting people back to work and doing that with an industry that we're going to create and produce the actual batteries here in the good old U.S. of A. Dow's approach is we think unique. We were founded on electrochemistry over 113 years ago, but in addition to being a leader in advanced materials and also having a competency in how do you scale up and do large scale manufacture and drive out costs, we've also formed a JV with Cochem America. So, we're looking at the holistic value chain to ensure that we can help launch this very viable and very vibrant industry. So all the way from raw materials to battery cell, battery pack manufacture and then having a strategic alliance with customers who will put these batteries into their vehicles. And we think that holistic approach is a necessary requirement for ensuring the successful launch of this industry.
Monica Trauzzi: Should the government though really be picking winners and losers and shaping the direction of this industry?
George Hamilton: Well, it's a great question, Monica. Most other countries do this and if we don't, we're going to find ourselves at a competitive disadvantage as a country in another area that is of strategic importance to our country. When you talk about launching a new industry and if you go back in history look at some of the other successful industries that have been created, like aerospace and the computer industry, just to name a couple, it has taken very close and very strong partnerships between public and private to get that going. The risk in a game like this at the early stage is more than I think is reasonable to ask a private corporation to bear. But when it is of such strategic importance to the country, yes, the government does need to step in early to help with the R&D and the launch and the manufacture at the early start of the launch of the industry.
Monica Trauzzi: But if these batteries are going to be such a hit and play such a prominent role in the future of our auto industry, why should taxpayer dollars be going to help this start up?
George Hamilton: Well, again, the risk at the stage of launching a new market, a new industry is still very high. The market today is relatively small. The goal is by 2015 President Obama has stated he'd like to have us with a million electric plug-in electric hybrid vehicles in the marketplace by that time frame, that's roughly 10 percent of the market just for the U.S. The global market is about 50 million light vehicles produced a year. So you can see that it's a very high risk from the market creation standpoint and I don't think it's reasonable that companies would step in with that level of risk.
Monica Trauzzi: Let's talk a bit about the technology because we're talking about advanced batteries, so it differs from what people are driving within their Priuses right now. How viable is that newer technology then in terms of safety, reliability, and also cost?
George Hamilton: Well, you're right; the technology that's used today is nickel metal hydride. The technology, when we talk about advanced energy storage is lithium polymer or lithium ion is the common term that's used, which has significantly more energy, more energy storage capacity which allows for longer distances to be traveled on a charge or smaller battery packs which are critical for package space in the vehicle. They can also bring improved safety versus the current technology that's used in hybrid products today. So it is critical that we get this new technology into the electric vehicle. Now, I say new, but lithium ion is already used in a number of other applications today, both from laptop computers to the technology that Dow has with our partner Cochem America. We supply batteries, lithium ion and lithium polymer batteries into a number of very demanding military applications today.
Monica Trauzzi: Are batteries coming out of the U.S. going to cost more and is it fair to make U.S. consumers pay a premium for American-made?
George Hamilton: Well, I can't speak to whether our batteries will cost more. Ultimately, we're going to have to be able to compete with batteries produced anywhere in the world. That's not unlike any other manufactured commodity and the reason that the manufacturing base here in this country has dwindled over the years is because we have been at a competitive disadvantage and that's why, again, involvement, active involvement from government is so critical, not just in the funding of R&D and getting the first couple of plants up and running. This is not about a plant or two, this is about an industry, so in addition to the funding that's coming from the Department of Energy we still need an address to other issues that have made manufacturing in this country noncompetitive, things such as health care, port reform, just to name a couple, corporate taxation. So we still need a higher address to some of those other issues to ensure that when we start to manufacture these components and these batteries here that we can compete with the rest of the world when they come after this market. And they will.
Monica Trauzzi: Will the timeline for the manufacturing of these advanced batteries fall in line with the restructuring of the U.S. auto industry? I mean how are those two lines going to intersect?
George Hamilton: Well, the U.S. industry, as you know, are undergoing a major restructure even as we speak, a lot of work to be done there, but I'm convinced that what they're going through is going to allow those companies to emerge much stronger, much better to be successful going forward. The battery work that's being done today will be there when they're ready. When the car companies are ready to put vehicles on the road we're going to be there. Assuming that the DOE funding is decided as early as July, we'll be prepared to break ground in the second half of 2009 and be producing batteries for consumption in late 2011, early 2012.
Monica Trauzzi: Final question here. Building a facility like this would obviously have great economic benefits for the surrounding community, whether it's a Michigan or Kentucky. So what kind of numbers are we looking at in terms of job growth and also economic growth?
George Hamilton: For one facility with Dow we're looking at initially about 400 jobs just for the construction of a manufacturing plant and then ongoing, roughly 800 jobs just to man that one facility. But then you start to think about all of the other jobs that will be created across the value chain, from raw materials to batteries to moving the materials to the marketplace, to the car companies, etc. As this evolves it's going to create hundreds of thousands of jobs.
Monica Trauzzi: OK, we'll end it right there. Thanks for coming on the show.
George Hamilton: Thanks for having me.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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