Electric Cars and the Lithium Battery Market

Monday, Apr. 05, 2010
Why Start-Ups Are Charging Into Lithium
By Steven Gray / Detroit

In February, President Barack Obama told the crowd at a Henderson, Nev., high school that not so long ago, the U.S. made barely 2% of the advanced batteries used in the world's electric vehicles. Now, thanks to a multibillion-dollar federal investment, American companies are positioned to increase production tenfold — and potentially control 40% of the global lithium-ion-battery market by 2015. "We've created an entire new industry," Obama said.

Not quite, but certainly the beginnings of one. Demand for lithium-ion batteries is increasing dramatically as electric-car technology improves and prices drop. Nissan has introduced the all-electric Leaf, and this year Chevy will debut the long-anticipated gas-electric Volt. Those and future electric cars need battery packs, and at least a dozen American lithium-battery start-ups are competing with Asian companies such as Sanyo and Hitachi to provide them. "There's a tremendous amount of competition," says David Vieau, chief executive of A123 Systems, a Watertown, Mass., start-up powered by federal money that is vying for the business. (See the history of the electric car.)

And it's a ton of business. The consulting firm Pike Research estimates that the global market for lithium-ion batteries could grow from $877 million this year to $8 billion by 2015. In North America, the market is expected to expand from about $287 million this year to $2.2 billion in 2015.

A123 Systems is a window on how the government's multibillion-dollar electric-vehicle gambit is working. The company was founded at MIT in 2001 with a $100,000 Department of Energy grant. One of its early products was lithium-ion batteries for power-tool maker Black & Decker. Last year, A123 Systems got a $249 million federal grant to open at least three lithium-ion-battery plants in Michigan that will employ hundreds of workers. Michigan is home to or close to many of the plants where electric vehicles are being made, of course, and the state has a surplus of skilled workers. It's not, ahem, a bad choice politically either.

Vieau attributes his company's recent success in part to its deep finances and manufacturing capacity. Customers regularly ask, he says, "Do you have the financial wherewithal to keep up and execute at a large scale?" Companies like A123 are busy wrestling with two key issues facing electric-car batteries: providing enough power to the car's engine and storing enough power to guarantee a defined range — say, 200 miles (about 320 km) — between charges. The goal for electric-car manufacturers is an affordable battery that can handle countless partial charge-discharge cycles over an eight-to-10-year life cycle. The battery has to absorb energy from braking and provide short bursts of power for acceleration. Lithium-ion batteries, with their high density-to-weight ratio, provide the greatest acceleration and range with the fewest batteries compared with lead-acid or nickel-metal-hydride batteries. One big problem: they can overheat and even blow up — bad enough in a single-battery laptop but potentially disastrous in a multibattery electric car. So engineers have been busy resolving the heat problem and refining the batteries' ability to handle partial charge-discharge cycles.

As for affordability, lithium-ion battery packs currently cost about $1,000 per kilowatt-hour of capacity. Which means the GM Volt's 16-kW-h battery pack alone would cost $16,000, according to some industry analysts. The price per kilowatt-hour has to fall below $500 to make production viable — and it will.

Sakti3 is another company trying to create a breakthrough. The company was launched a few years ago at the University of Michigan by an ambitious young engineering professor, Ann Marie Sastry. Sakti3 is developing solid-state (as opposed to liquid) lithium-ion batteries that Sastry believes will enable cars to travel twice as far as batteries do now, allowing the cars to be used the way internal-combustion-engine-driven vehicles are. Her firm is developing prototypes to deliver to automakers later this year. Sastry's 20-employee firm, based in Ann Arbor, has generated millions of dollars in government grants and considerable buzz — but so far no juice.

Automakers, meanwhile, are developing their own battery capability. Ford, for one, believes that designing its own lithium-ion battery packs will help streamline the development of its electric vehicles and reduce the cost. Design experts will be brought in-house, says Nancy Gioia, Ford's director of global electrification. By developing battery packs, Gioia says, "we get the volume and scale of more than 1 million units on our battery-management systems. Our suppliers aren't in a position to do that yet."

While they wait for the U.S. electric-auto market to develop, some new suppliers are looking toward consumer electronic goods and markets outside the U.S. to keep their plants busy and improve quality until the big orders come in. "We're in the early stages of what will be a significant run-up," says A123's Vieau. "There's a lot of business out there." Sastry echoes that view, saying many automakers rely on engine suppliers. "If the dream I and others have is realized, we'll see batteries being treated like engines," she says. Job engines, no less.




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Estate Planning Clear and Simple (NY Times)

March 24, 2010
Assemble a Paper Trail, and Make Sure Your Heirs Can Follow It
By PAUL SULLIVAN
NO one wants to think about dying. But refusing to look at the documents that will determine where your money goes when you pass away will not make you live longer. It will just make sorting through everything more difficult for your heirs.

Any review of financial health needs to take into account the legal documents that govern our assets and our lives, if we become incapacitated or die with minor children.

Holly Isdale, managing director at Bessemer Trust, said she likes to break down this task into “high priorities and someday-maybes.” And this seems as realistic a strategy as any to force yourself to review these documents.

WILLS AND TRUSTS The whole notion of the sanctity of a will has been thrown into disarray by the expiration of the estate tax. But the bottom line is that, before you can review your will, you need to have one. And 65 percent of Americans do not, according to a survey released last month by Lawyers.com.

There is no excuse for this. A basic will is cheap and can be facilitated through online sites like legalzoom.com.

Many people think that if they die without much money, their heirs will simply inherit it. They will, eventually. But first the state will appoint a conservator and hire lawyers, the costs of which will be deducted from your estate and ultimately decide how your money is passed on, said Edythe M. DeMarco, first vice president at Merrill Lynch Global Wealth Management. A simple will avoids this.

Once you have a will, it is crucial to keep it up to date. This should be done every five years or whenever there is a major life event. “The pitfall with the will is, they set it and forget it,” said Ken Kilday, a wealth manager at USAA.

In a year when there is no federal estate tax — though there will almost certainly be one in 2011 — reviewing wills and trust documents should be on everyone’s to-do list.

Reviewing both wills and trusts for someone with substantial assets is particularly important this year. Even though there is no estate tax, wills can have clauses that distribute assets to trusts as if the tax still existed. This could end up leaving some heirs too much money and others none at all. And since a federal estate tax will return next year even if Congress does nothing about it, there will be a need to review everything again in 2011.

BENEFICIARIES The form that can often wreak havoc on a family is the beneficiary designation form. It determines who will get your insurance and retirement accounts, so-called contract assets as opposed to financial assets. Many people do not know that it overrides a will.

If you named your brother on your beneficiary designation form for an IRA and die 30 years later without having changed it, your brother, not your spouse or children, gets it.

This happens more often than you would think, advisers said. The reason is forgetfulness. “The worst thing from my perspective is to try to explain to a widow that her deceased husband’s former spouse actually inherits the IRA,” Mr. Kilday said.

Whether this is a high-priority or someday-maybe issue depends on your personal life. But one thing everyone should have is a contingent beneficiary, in case the first one dies before they do. Ms. Isdale said she suspected that many people neglect to name one at the time because they plan to do it later.

HEALTH CARE PROXIES AND GUARDIANSHIP These are two high-priority documents because they address something far more important than money: what happens to you if you are incapacitated, and who cares for your children if you die.

With both, it is essential to make sure the person you have designated is still someone with whom you are in close contact. Often a guardian is named at a child’s birth, but the families move away or lose touch. When it comes to health care, you should also sign a HIPAA, or Health Insurance Portability and Accountability Act, release form so your health care proxy can have access to your medical records.

A related issue is the traditional power of attorney. Many people talk of having a durable power of attorney, but Mr. Kilday points out that if that were the case that person could act on your behalf immediately. What you want is a springing durable power of attorney, which is activated by events you detail.

This brings the conversation back to wills. “The other major pitfall is people have a power of attorney and they think that means they don’t need a will,” Mr. Kilday said. “The problem is that power dies with you.”

TITLING OF ASSETS This is a someday-maybe issue because it can be time-consuming and expensive. For people who would have been subject to the old federal estate tax, for example, it would have made sense to retitle assets like a home in just one name. But, as Ms. Isdale pointed out, not all spouses feel completely comfortable ceding control.

Another issue is the well-meaning parent who, for help with her financial matters, puts one child on her accounts. When she dies, those accounts belong to that child alone, even though her will says the money should be split among all three children.

Even if that child wants to make things right with siblings, he could end up using some of his gift tax exemptions to do so. “You can disclaim it, but it’s messy,” Mr. Kilday said.

SINGLES AND SAME-SEX COUPLES The law always looks for legally recognized family members in dispensing with your estate, but who is going to take care of your affairs if you are not in a traditional marriage?

Someone who is single may want to name a health care proxy who lives closer than a parent who could be thousands of miles away.

Ms. DeMarco said same-sex couples need to be particularly vigilant in their estate and proxy planning. She noted that until a few years ago in Rhode Island, where she works, a domestic partner could not make funeral arrangements; it had to be done by a family member.

Health care proxies are important, but so, too, are the documents that will direct assets to a partner. “For a nonfamily member, it’s a hard and difficult legal road,” she said. “In absence of these documents, the state is going to name the beneficiary, and the law looks to the bloodline.”

BALANCE SHEET If your family cannot find the documents you have worked hard to update, you may have wasted your efforts. Ms. Isdale suggested drawing up a balance sheet that lists the basic information about your assets. She called this a high-priority item and suggested that a more exhaustive one should be on the someday-maybe list.

Mr. Kilday said he advises clients to include a final letter of intent. It has no legal standing, but it can help guide your heirs with what you want done after you’re gone. “Clients kind of chuckle and say, ‘It doesn’t matter to me, I’m dead,’ ” he said. “But from the kids’ perspective they want one last chance to respect and honor you.”