Why GM Will Win By Moving Electrification In-House

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GM's new battery pack, built in Brownstone, Michigan, represents the first time a manufacturer has built a lithium-ion battery pack in-house (GM).

Whereas most people would consider the company's 2009 bankruptcy as the pivotal turning point in the contemporary history of General Motors, I'm willing put my bet behind the 2007 launch of the Chevy Volt extended-range electric car.

No other product from GM had such a systemic effect within the corporation, shifting nearly overnight the idea of what's important for the company and its culture.

And while some of the motivation behind the car's debut might have been founded in a vacuous effort to rebrand the company's image, the Volt was an inherently positive move for the big company. Now, roughly a year before the car will go on sale, GM is making another move that might be as important as the Volt itself: it plans on building most, if not all, of the guts of the hybrid and electric systems within its own facility.

Boring? Hardly. When manufacturers made moves over the past decade to produce more and more electric vehicles, the one aspect of the strategy that I never understood was why they'd all want to purchase the important aspects of the technology -- batteries and electric motors -- from the same suppliers. This was the equivalent of moving to a PC computer model: components would be shared and commoditized, therefore making the real unique selling proposition of any product the way it's designed or the way it's serviced.

Since carmakers (via their franchised dealership model) have historically underwhelming customer service, this spelled out a future that hinged upon a car's styling alone. This seemed limiting and, in the long run, a curious business strategy.

Thankfully a few automakers are realizing the importance of keeping the secret sauce of electrification within their four walls. Honda and Toyota have built their own electric motors, but now the domestics are starting to move in-house and GM is farthest along on its path.

Helped in no small part by a $105 million grant from the U.S. Department of Energy, GM made a move last week to retool a transmission plant in Maryland to make the motors for the company's next generation of electric systems. The decision will create 200 jobs -- enough to stir local politicians in the Baltimore area to applaud the move -- but the larger impact of the decision will play out in the years to come.

This week I had the opportunity to speak with GM's Pete Savagian, director of the electric motors, who sees the move as necessary as the company tries to get the costs of the new systems down to something that everyone will be able to afford.

"When we look at our future we see a lot of electric motors in our cars," said Savagian. "And those electric motors have a great bearing on the affordability of the car, the mass of the car, the smoothness of the car, [the] efficiency of the car. So we think the time is right to expand our footprint beyond just the engineering of electric motors, but now into the manufacturing."

Listen to the full conversation with Savagian below:

Batteries Hold The Power, Literally
Beyond the motors, the biggest move could be what GM is doing with batteries. In January the company rolled its first battery pack down the assembly line of their new facility in Michigan, a watershed moment not only for GM but for the rest of the industry. It was the first time a carmaker manufactured its own lithium-ion battery pack.

By building their own motors and batteries, GM can match or excel the work Toyota (and to a lesser degree, Honda) has done in hybrids.

In an electrified world, the battery and the electric motor becomes the secret sauce: where we once considered horsepower or even, more recently, miles per gallon to be important metrics, the future will be shaped by costs per mile and a vehicle's range. In other words: how much does it cost and how far does it go?

Especially when the infrastructure for electric "fueling" stations is a decade or more away, the amount of energy a driver can store inside the vehicle (within a battery) will be paramount. Having juice in your battery will be as important as having a bottle of water in the desert.

With few places to stop and fuel, the first generation of true electric vehicle drivers will learn to love the cars that get them the most miles for their volts.

The company that can display leadership in this regard will be the front-runner in the next era. So far it appears GM has a first step on everyone else.

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