Why GM is jumping into bed with the South Koreans

Over the weekend, the New York Times Magazine ran out an interesting piece on a big U.S. problem — its much-weakened capacity to manufacture consumer products. The piece, by Jon Gertner, tells the story of the Obama Administration’s effort to start restoring that ability through an energy policy focusing on advanced batteries. It’s a controversial policy — Washington has distributed some $2.5 billion over the last two years to build a lithium-ion battery manufacturing industry from scratch, which critics call "picking winners" — but it shouldn’t be. Given the lack of a growth scenario for well-paying U.S. jobs, it is sensible to get serious about the hot global competition to dominate future battery-driven industries.

But there is much chance that U.S. companies need more than stimulus to triumph — the trial-and-error process of scaling up does not happen in a season or two, but over many, many manufacturing cycles often lasting years and sometimes decades.

Which explains a second bit of news — that General Motors is intensifying its collaboration with South Korea’s LG Group on the manufacture of the hybrid Volt. LG is one of the world’s most agile and competitive manufacturers, a company with $89 billion in 2010 revenue and a big part of South Korea’s eclipsing of the Japanese in the making of many electronics. LG already manufactures the nerve center of the GM Volt — its lithium-ion battery — but now the two companies are going to share costs 50-50 on the entirety of future electric and hybrid models.

It’s not that the U.S. is behind on everything. After all, the lithium-ion technology on which LG relies was invented at the U.S. Argonne National Laboratory. But GM Vice Chairman Steven Girsky, quoted by the Wall Street Journal’s Sharon Terlep, explains that GM needs to learn an electronics industry trick, which is turning out progressively newer and newer models at a fast pace."They are flexible, they are used to things changing quickly," Girsky said of LG. "We need to get used to that."

This partnership favors the South Koreans as well. LG will turn itself into a serious automobile-maker.

GM is not the only automaker recognizing that this race may not be won alone. At Consumer Reports, Paul Eng writes that Toyota for example has teamed up with both Ford and Tesla Motors for various models.

All companies and countries in the battery race are taking a big risk, Girsky noted — "We don’t know how big this market is going to be. This is a way to go at it in an efficient way that doesn’t risk the company."