Race to Make Electric Cars Stalled by Battery Problems

The Phoenix - appropriately named!!

GM, Toyota Seek Ways To Snuff Out  Fire Risk;
Start-Ups See "Possible Opportunity".

There is one thing the car people aren't charged up about and that's batteries.

For all the hoopla, nobody yet has figured out how to make a small enough battery that will hold a big enough charge
for the new cars -- and not be a risk to burst into flames.

The limits of electric-car technology are achingly clear in one of the most-heralded cars on the drawing board:
GM's Chevy Volt. GM executives mention the prototype, which the Detroit auto maker aims to put into production in three years,
nearly every time they discuss their vision for "gas free" cars. But GM still hasn't solved the battery problem.

A handful of companies are racing to come up with a battery suitable for this next generation of electric cars.
The competition pits big Asian battery makers against a gaggle of small start-ups, most of them based in the U.S. Each is trying to
come up with a viable power source for long-range electric cars and for gasoline-electric hybrids such as the Volt, which rely far
more on electricity than do hybrids currently on the market.

But the most promising technology, lithium-ion batteries like the ones used in laptop computers and cellphones, has been plagued
by problems. Earlier this week, for example, the battery in a laptop made by a South Korean firm burst into flames.
U.S. transportation authorities recently said air travelers will no longer be allowed to pack loose lithium-ion batteries
in checked luggage.

Car makers can't very well sell vehicles that might "ignite and burn up grandma and two kids sitting on half a ton of
batteries in the car," says Tim Spitler, a battery-material researcher at Altair Nanotechnologies, which is working to develop
a car battery.

Japanese companies have long dominated the lithium-ion battery market. But a slew of obscure American companies such
as A123 Systems, EnerDel Inc., Valence Technology and Altair have gotten into the game, hoping to leap-frog their Japanese
competitors by solving the problems.

Rising oil prices, coupled with public concern over global warming, have prompted auto makers to intensify efforts to build
cars that run on alternative fuels. The hope is that cars running on powerful batteries could help reduce the total carbon dioxide
pumped out by passenger cars, which scientists think is a major contributor to global warming.

Toyota, GM and other auto makers have been experimenting with several different systems for harnessing electric power:
a new kind of hybrid called plug-ins, which rely on small gasoline engines to occasionally boost the batteries, and cars that
run entirely on batteries. Both systems require cars to be plugged in for recharging.

The popular Toyota Prius hybrid, which never needs to be plugged in, relies partly on gasoline power almost as soon as it
picks up speed, and averages about 46 miles per gallon. GM says its plug-in Volt will be designed to run on batteries
alone for up to 40 miles -- the length of a typical commute.

Plug-in hybrids and fully electric cars both require batteries that can store lots of energy, recharge quickly and operate in
all weather without overheating or failing. Right now, no commercially available battery technology fits the bill, including the
batteries used in the Prius, called nickel-metal-hydride cells.

Lithium-ion technology holds the most promise. Lithium-ion batteries, unlike the disposable alkaline variety sold in drugstores,
hold lots of energy in a small cell, and can be charged again and again. Japanese companies such as Sony Corp.
and Sanyo Electric Co. took an early lead in figuring out how to use the technology to make batteries for consumer electronics.

Then reports began surfacing that laptop and cellphone batteries were overheating and catching
 fire. The batteries tend to short-circuit when damaged, or when a part designed to separate positive and  negative  
electrodes is scarred during manufacturing, among other possibilities.
 
In 2006, Sony decided to  undertake a  massive recall of its batteries used in laptops sold by Dell Inc.
Many  other battery and electronics  makers followed suit. Sanyo recalled laptop and cellphone batteries. Nokia  Corp.
offered to replace cellphone  batteries made by Matsushita Electric Industrial Co.

Toyota had planned to use lithium-ion batteries in a new version of the Prius that would get 60 to 80 miles per  gallon,
according to Toyota engineers. But the safety problems prompted Toyota to push back the planned  launch of the lithium-ion
technology from later this year to late 2010 or early 2011.

The problem presented an opportunity for U.S. battery makers to catch up with the Japanese, who previously  appeared
to have the market locked up. Whichever company solved the overheating problem would have a  shot  at lucrative deals
with auto makers such as GM. The challenge was to figure out how to reduce the danger  level of the lithium-ion technology
by altering the chemical makeup of the battery guts.

Early last year, GM invited 27 lithium-ion battery producers from around the world to provide sample battery cells and
performance data in order to be considered for the Volt program.

GM eventually selected two "development suppliers," consortiums of companies whose technologies it will test for the Volt.
One consortium includes A123 Systems, a start-up led by a group of scientists from the Massachusetts Institute of Technology.
The other group is led by a unit of South Korean chemical maker LG Chem Ltd.

A123 Systems aims to commercialize battery technology developed by MIT professor Yet-Ming Chiang. Mr. Chiang set up the
company in 2002 with Bart Riley, formerly an executive at American Superconductor Corp., and entrepreneur Ric Fulop.
After starting with a research grant from the U.S. Department of Energy, A123 raised $132 million in capital from investors
including Sequoia Capital, a Menlo Park, Calif., venture-capital firm, and General Electric Co.'s commercial-finance unit.
It hopes to go public as early as this year.

A123 has been working with iron-phosphate technology in an effort to create a lithium-ion battery that's less likely to overheat.
It already supplies lithium-ion batteries to Black & Decker Corp. for use in power tools.
But winning the Volt deal would boost its business substantially.

David Vieau, the company's chief executive, sees a limited window of opportunity. "When the market is in such a big disruption
as it is now, that's the only time a company like ours has a chance to cut into the business," he says.
"There's really no existing supplier" that can meet technological demands for a car like the Volt. "They can't get it from Sanyo
or Panasonic. They have to shop around, so that opens up the door for an opportunity for someone like us. It's a very unusual time.
It's only going to last for a certain period of time, probably five years."

The big Asian battery makers have enormous advantages, starting with the big investments they've already made in the
manufacturing process. Mitsuru Homma, Sanyo's top battery executive, contends that no matter how good a company is
at laboratory research, it needs to be good at manufacturing to produce a safe battery.

"It doesn't matter how far ahead you are in research and development" because all lithium-ion batteries are prone to overheating,
no matter what chemistries you use, he contends. "Clever design can minimize the chances for overheating. But if you don't have
fool-proof manufacturing know-how, you won't be able to guarantee 100% the safety of a battery cell, no matter how safe it may
be proven in the lab."

Altair Nanotechnologies, based in a warehouselike building near the airport in Reno, Nev., is typical of the small companies
chasing the opportunity. It claims to have improved on lithium-ion battery technology. Its challenge is to convince potential
customers that its technology is the answer and that the company is capable of large-scale production.

Chief Executive Officer Alan Gotcher says that Altair, which has been listed on the Nasdaq Stock Market since 1997,
has a "checkered past." For years, he says, it operated as a "speculative company" that, among other things, explored for oil and gas.
Since 2004, he says, it has focused on manufacturing high-tech materials for batteries, pharmaceuticals, paint pigments and industrial chemicals. In the first three quarters of 2007, it had a loss of $16.7 million. During an employee meeting last fall, Mr. Gotcher stressed
that all employees need to contribute to slowing the company's cash burn to "make sure the company will stay around."

Mr. Spitler, a 60-year-old engineer, is at the center of Altair's battery efforts. A two-time college dropout who got his degree in
chemistry at age 29, he worked for years for Dupont Co., then for a company that was sold in 1998 to Altair.
At that company, he researched ways to improve the quality of paint.

It turned out that his research on paint pigments was applicable to the battery problem. His paint work and related experiments
involved shrinking particles of a material called lithium titanate. That material, he contends, is useful in lithium-ion batteries.
Other scientists, he says, had recognized that lithium titanate could make lithium-ion batteries more stable chemically, and thus
less likely to overheat and ignite. But using the material, those scientists concluded, limited both the battery's power and its
energy density -- its ability to store energy in a given volume of space.

Mr. Spitler contends that if the particles are shrunken small enough -- to 40 millionths of a millimeter in diameter -- they'll work.
At Altair, he says, he came up with a cheap way to do that. The equipment Altair uses to produce the particles and how it "mills"
and "bakes" them, Mr. Spitler says, "we never reveal it to anybody."

When Mr. Gotcher, a 57-year-old chemist, arrived at Altair in 2004 to take over as chief executive, he found Mr. Spitler's technology
sitting on a shelf. He decided to steer Altair into the business of making lithium-ion batteries.
He raised capital through a stock offering and brought in a dozen battery experts to help create proprietary batteries
and battery modules.

Altair's engineers say their batteries are fast-charging and powerful, work at temperatures ranging from 167 degrees Fahrenheit
to 58 degrees below zero, and are less likely to catch fire or explode.

Altair began selling them in 2006, but sales have been slow. The company's executives say they are optimistic about getting
orders from a few electric-vehicle start-ups, such as Phoenix Motorcars Inc. of Ontario, Calif., and Lightning Car Co. of the
United Kingdom. But in November, Altair disclosed that Phoenix would likely not make $16 million to $42 million in orders this
year, which Altair had projected. "Orders may fall below $16 million," Altair said in a Securities and Exchange Commission filing.

One big problem is that Altair's batteries have a lower energy density than competing designs. As a result, a hybrid or electric
car would need about twice the volume of Altair batteries as it would batteries that that pack a bigger punch, such as the ones
from A123 Systems.

That makes Altair's products less suitable for small hybrids like the Volt than for larger vehicles like SUVs and pickup trucks.

Mr. Gotcher remains hopeful. In November, Altair raised $40 million through a stock sale to a Dubai trading company,
and a Japanese trading company is considering investing, people familiar with the matter say.

Last month, Japan's Toshiba Corp. announced it had developed a new lithium-ion battery that offers "excellent safety"
and would last through 10 years of "constant, rapid charging." It uses technology similar to Altair's.