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Obama's $2.4 billion electric car bet

At a time when the public is growing increasingly tired of government handouts, bailouts and rescues, the Obama Administration goes and hands out $2.4 billion for electric car and hybrid technology projects. This could be money poorly spent, since other like-minded programs such as President Clinton’s Partnership for a New Generation of Vehicles and another Bush-era program for fuel cells yielded little in the way of fuel saving vehicles driven by an actual car buyer.

But you know what? This is still something that needs to happen. Unfortunately, American industry has ceded the lead in developing hybrids, electric cars and the needed lithium-based batteries that will help them go. Even though General Motors led the way with the EV1 electric car, they fumbled away that lead. Japanese and Korean companies have developed expertise in batteries.

The $2.4 billion will be spread over 48 different projects in more than 20 states as part of the American Recovery and Reinvestment Act. Michigan got the biggest slug of cash, with $1 billion of the money going to the state’s companies and universities. The cynical view says that Michigan’s mostly Democratic voters are getting payback for helping to pave Obama’s road to the White House. Perhaps it is, in part. But let’s face it, that’s where the automakers and their parts makers are located. That’s where the R&D is being done.

Johnson Controls and A123 will get $550 million to establish their beachheads for high-tech battery development. The Big Three will receive more than $400 million. Compact Power and Dow Kokam, a joint venture between Dow Chemical and Korean battery maker Kokam, got a total of $300 million.

We’ll see what comes from the money. But at least one of them, the Dow Kokam venture, is going to directly set up a lithium-polymer battery plant and create jobs. The joint venture will build a plant near Dow’s headquarters in Midland, Mich., that will employ 800 and start making lithium polymer batteries for electric vehicles next year. Dow wants to sell to Smith Electric Vehicles, which sells fleet trucks to the likes of UPS, FedEx and Coca-Cola. But Dow is also talking to major automakers.

Dow and Kokam will get $161 million from the government. George Hamilton, Dow’s vice president for government markets, says the grant will help mitigate the risk for the companies to invest in advanced batteries. And that’s where the program can kick start development. With hybrids selling to just 4% of car buyers, any bet on electric cars is risky. But if the government can step in, it could help American industry get back in the game.

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