Audit blasts U.S. loans to support Michigan battery plant
Editor's note: An earlier version of this story provided an incorrect history of federal loan guarantees and grants for advanced vehicles. Legislation that provided loan guarantees to retrofit U.S. plants to build advanced vehicles was signed by President George W. Bush. Grants for advanced battery research and manufacturing were awarded under a law passed in 2009 during the Obama administration.
WASHINGTON -- An LG Chem battery plant in Michigan that received $150 million in U.S. Department of Energy grants used federal dollars to pay employees who played games, watched movies or did community service during work hours, a government audit says.
The audit, released today by DOE Inspector General Gregory Friedman, says agency officials failed to properly manage the 2010 grant to the Holland, Mich., plant, owned by a subsidiary of Korean electronics giant LG Chem.
Auditors concluded that "the overall goals related to production of battery cells and the projected number of jobs created had yet to be met," the report says.
It is the latest black eye for the federal loan guarantee and grant programs put in place several years ago to help jump-start and commercialize electric vehicles. Sales of EVs and plug-in hybrids climbed to about 53,000 in 2012, triple the previous year.
Some government-funded projects have lived up to expectations, but others have fallen well short.
The $304 million plant has yet to produce any battery cells for public sale. LG Chem told government officials that the plant would create about 440 jobs, but hiring has lagged behind initial plans and the company instituted furloughs last year.
When the plant was built, General Motors was expected to buy the batteries it produced for use in the Chevrolet Volt. The automaker has continued to buy batteries from an LG Chem plant in South Korea, even though the Michigan plant could have met GM's production needs, the audit says.
And because of the terms of the grant, DOE has no leverage to change the situation.
"Until the shift in production takes place or some alternative use for the plant is developed, U.S. taxpayers will receive little direct benefit from a plant for which they provided up to half of the funding," the report says.
In a statement emailed to Automotive News, LG Chem said it accepted the government's findings. The company also said it is "acutely aware of the disappointment arising from the delays in our start of production."
"These market-driven delays have been very difficult for our team members, for our community and for our company," the company said in a statement. "Nevertheless, we remain fully committed to launching production at [the] facility in Holland, Michigan and will use our best efforts to create additional new jobs and contribute to a more independent, sustainable energy future."
Auditors also confirmed reports by local newspapers and TV stations last fall that LG Chem employees were being paid despite having little work to do.
The payments by DOE for "nonproductive" activities totaled about $840,000, and LG Chem has reimbursed the agency in response to the audit, the report says.
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