General Motors Corp. has been negotiating to buy troubled battery supplier Cobasys LLC for several months, according to a report last week in Automotive News cited by AutoBeat Daily and AutoTech Daily.
Citing several unnamed industry sources, the newspaper says a deal is nearing and that GM has hired BBK Ltd., a Southfield-based consulting firm that specializes in turnarounds, to conduct afinancial audit.
Cobasys LLC, an Orion Township-based joint venture between Chevron Corp. and Rochester Hills-based Energy Conversion Devices Inc., supplies nickel-metal-hydride batteries to GM for use in mild-hybrid versions of the company’s Saturn Aura, Vue Green Line and Chevrolet Malibu vehicles.
Battery problems triggered a recall of these vehicles late last year that also has slowed production of new hybrid models. AN says GM also plans to source batteries for some other hybrid models from Cobasys, which is also developing next-generation lithium-ion technology.
In a quarterly regulatory filing last month Energy Conversion Devices warned that Cobasys is in danger of going bankrupt if it isn’t sold. The venture lost about $76 million last year and is on pace to lose slightly more this year. GM would be hit hard if Cobasys went out of business because a new battery supplier probably couldn’t step in until 2010, according to AN.
GM co-founded Cobasys with ECD’s Ovonic Battery Co. arm in 1994. In 2000, GM sold its stake to Texaco Inc., which merged with Chevron a year later.
Last month’s regulatory filing with the U.S. Securities and Exchange Commission revealed that ECD and Chevron have been arguing about the ownership and funding of Cobasys since last September. Chevron accused ECD of failing to fund Cobasys and cooperate on a budget for this year. Another point of contention is Chevron’s “preferred interest” in the 50:50 partnership.
The case went to arbitration in January. But before a ruling was rendered, ECD and Chevron agreed to begin negotiations with a potential buyer and an unnamed customer (both of which appear to be GM) provided funding assistance -- including loans for equipment and buying batteries at higher prices -- to the supplier. The original deadline to strike a deal has been extended seven times, according to the SEC filing.
Cobasys has fixed the problem that triggered last year’s recall and has begun making batteries again at its plant in Springboro, Ohio. AN says additional capacity is available at the facility if needed.
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