Jan. 12 (Bloomberg) -- General Motors Corp. will open a lithium-ion battery factory in Michigan, the first for a large U.S. automaker, to assemble the power packs for the Volt plug-in electric car.

The plant will create the packs from battery cells supplied by Compact Power Inc., a unit of Seoul-based LG Chem Ltd., Chief Executive Officer Rick Wagoner told reporters today at the Detroit auto show.

Investing in a battery factory increases GM's bet on electric vehicles as the biggest U.S. automaker moves toward starting sales of the Volt in November 2010. Detroit-based GM has committed more than $1 billion to the car, Wagoner said.

``This announcement says that they're preparing to be able to supply whatever the market demands,'' said Wes Brown, an analyst at market-research firm Iceology in Los Angeles. ``By doing something like this they have more control over their supply.''

Wagoner said the plant's location should be determined this quarter after state and local negotiations. Troy, Michigan-based Compact Power will make the battery packs until GM's facility is operating. An LG Chem plant in South Korea will start producing the battery cells in the first half of 2010.

``This is a further demonstration of our commitment to the electrification of the automobile,'' Wagoner said at the North American International Auto Show.

Volt Factory

The factory probably will be within 50 miles of the plant for the Volt, in Hamtramck, Michigan, said Gary Cowger, GM's global chief of manufacturing and labor. Because the battery packs are about 6 feet (1.82 meters) long and weigh roughly 400 pounds (181 kilograms), the automaker wants them close to the car's assembly site.

GM may use an existing building or new construction, and the plant will employ about 100 workers and require about 100 suppliers, Cowger said in an interview at the auto show.

Lithium-ion batteries can hold more energy than the nickel- metal hydride models now used in hybrids such as Toyota Motor Corp.'s Prius. Tests of lithium-ion packs for the Volt have been under way for the past 16 months, GM said. The contract award ends a review of cells from Compact Power and a Continental AG unit using technology developed by GM and A123Systems Inc.

Cell development will continue with suppliers including A123Systems and Tokyo-based Hitachi Ltd., GM said. The automaker will also open a battery lab in Ann Arbor in conjunction with the University of Michigan's College of Engineering.

Shares Gain

GM gained 12 cents, or 3 percent, to $4.15 at 4 p.m. in New York Stock Exchange trading. The shares have tumbled 82 percent in the past year.

The electric-auto push comes as GM restructures itself with $13.4 billion in federal loans intended to help ease a cash crunch. Losses have totaled about $73 billion since the end of 2004, when GM last posted an annual profit.

GM wants to use the Volt to narrow a technology gap with Toyota, which has vaulted to the global lead in sales of gasoline-electric vehicles thanks to its Prius. The lithium-ion packs will power the Volt for as far as 40 miles, after which a small engine-generator kicks in to extend mileage.

Plug-In Prius

Toyota is working on a plug-in Prius to match the Volt's projected range on one battery charge and said today that the 2010 model going on sale this year will average 50 miles (80 kilometers) per gallon in combined city-highway driving, up from 46 mpg.

The GM and Toyota announcements added to the focus on hybrid and battery-powered vehicles at the Detroit show.

Ford Motor Co. said yesterday it will join with Canadian parts supplier Magna International Inc. to offer a battery- powered car by 2011, while Chrysler LLC unveiled its fifth electric prototype, the 200C sedan. Chrysler plans to have at least one model for sale in 2010.

Honda Motor Co. displayed its new Insight hatchback yesterday, with a base price of about $20,000. It is intended to attract buyers who might have shunned earlier, more-expensive hybrids.

To contact the reporters on this story: Jeff Green in Detroit at jgreen16@bloomberg.net; Alex Ortolani in Detroit at aortolani1@bloomberg.net.

Last Updated: January 12, 2009 21:22 EST