GM Sells Its Share of Michigan Ultium Battery Plant to Raise Cash for Chinese Market Write Down

Hours after General Motors announced plans to sell its half of the Ultium battery plant in Lansing, Michigan to partner LG Energy Solution for a billion dollars, the company’s SEC filing revealed potential motivation for the fund-raising: a $5 billion-plus write-down of GM’s Chinese-market joint venture.

GM’s softening interest in the prismatic Ultium batteries produced by the joint venture plant has been obvious since the company hired Kurt Kety from Tesla and announced a strategic shift toward other battery formats. Recovering some of its investment in a battery technology that is no longer strategically crucial to the company makes sense.

GM’s Chinese joint venture is SAIC General Motors Corporation Limited, a 50/50 partnership with SAIC Motor Corp. Limited. GM announced a $2.6-2.9 billion impairment of equity interest in the joint venture as well as a $2.7 billion charge for SGM’s restructuring, which includes plant closures and product “optimization.”

The Lansing Ultium plant has not yet opened, and GM will continue producing Ultium batteries at existing plants in Warren, Ohio and in Spring Hill, Tennessee as its EV sales continue to grow during the company’s phase-out period for that battery technology.

“Our EV profitability is rapidly improving thanks in part to our strategic decision to build battery cells in the U.S. with LG Energy Solution,” said Paul Jacobson, GM executive vice president and CFO.  “We believe we have the right cell and manufacturing capabilities in place to grow with the EV market in a capital-efficient manner.”

Prismatic cells pack tightly into modules. GENERAL MOTORS CO.

GM currently employs Ultium battery cells in its Chevrolet Silverado EV, GMC Sierra EV, Cadillac LYRIQ, Chevrolet Blazer EV, and Chevrolet Equinox EV, as well as the GMC Hummer EV Pickup and SUV.  

These moves do not foreshadow an end to GM’s relationship with LGES. In fact, the companies inked a 14-year extension to their battery partnership that will include prismatic technology.

Recall that prismatic battery cells feature a flat, rectangular shape with a rigid enclosure. This contributes to space-efficient packaging within battery modules and packs, without the wasted space of tightly packed cylindrical battery cells. This can reduce EV weight and cost while simplifying manufacturing.

However, pouch-style and cylindrical batteries have seen more advances in cost and performance in recent years. That, along with the arrival of new leadership at the company has prompted a pivot to a cell-agnostic approach in favor of optimal range, performance, and charging speed. 

“Together with LG Energy Solution, we’ve built Ultium Cells into one of the largest battery cell manufacturers in North America, creating thousands of advanced technology jobs in the U.S. and powering our diverse EV portfolio,” explained Kurt Kelty, GM’s new vice president of battery cell and pack. “We’re focused on optimizing our battery technology by developing the right battery chemistries and form factors to improve EV performance, enhance safety, and reduce costs. By extending our partnership with LG Energy Solution, we’re taking an important step toward these goals.” 

GM can accomplish that without owning half of a third Ultium plant, while also recovering a billion dollars of investment to help it weather the losses from its Chinese business, so like a mutually beneficial trade of a pitcher for a slugger between Major League Baseball teams, everyone accomplishes their immediate goals.