Monday, July 09, 2007

LTC vs. The Rest

So for some reason, I started wondering about companies that might produce lithium-ion batteries for use in plug-in hybrid cars, and by searching for "lithium ion batteries" in Google Finance I discovered the company Lithium Technology Corporation (LTC, traded on the Pink Sheets as LTHU). A post on the Google Finance message boards by says the following:
GM has partnered with A123 systems, which is a privately owned LTHU competitor. A123 is currently in mass production, they do the batteries for dewalt power tools, same LiFePO4 chemistry. LTHU has been losing money for over a decade, it is run by old men. A123 is a newer company started up by an MIT graduate. I'm still optimistic about LTHU, seems like they could begin mass production any time.
A cursory glance at the A123 website vs. the LTC website would indicate that this comment seems to have some merit. A123 seems like a much more dynamic, entrepreneurial company, while LTC seems content with being a research-based company living on government contracts and grants. This realization dampens my enthusiasm over LTC's announcement that they have successfully retrofitted a Toyota Prius with their batteries to produce a plug-in hybrid capable of 125 miles per gallon. It seems like a more business-savvy company would be able to leverage this development into some sort of money-making (and technology sustaining) enterprise. Why not partner with some vehicle retrofitter in California to produce off-the-shelf plug-in hybrids for eco-conscious California consumers. People are clamoring for plug-in hybrids...what is LTC waiting for?

In a letter to its stockholders, LTC said this:
Over the next few months we plan a quantum leap in our production capacity to satisfy the growing demand for our products. We are still investing heavily in R& D, production machinery and in sales and marketing efforts. We believe that we should steer the company in a way that will build long-run sustainable value, especially in our core areas of competitive advantage where the future value of our company will come from.
They plan to increase production capacity dramatically, but will this plan pan out? Only time will tell, although the same letter mentions some new funding:
Recently, we closed on approximately $25 million in equity financing, which will be used to purchase manufacturing equipment in order to increase production capacity and repay some of our outstanding debt. Our recent equity financing was done with a Luxemburg asset management firm, Fidessa Asset Management S.A and its affiliate. We believe that this group has and will provide us with a strong financial backing.
Hopefully. But for now it seems that A123, which is lined up to produce the batteries in the Chevrolet Volt and Saturn Vue, as well as in hybrid buses for BAE Systems, is the industry leader. Apparently Compact Power, Inc. (CPI) is also supplying batteries for the Volt, so they're another player.

Interestingly, though, neither A123 nor CPI is mentioned by the CEO of LTC, Klaus Brandt, in this interview (search for "Klaus Brandt") on He cites Johnson Controls (and their partnership with Saft) as their primary competitor, which I suppose makes some sense given the fact that they were awarded one of two contracts with GM to work on the Saturn Vue (the other winner was Cobasys, a.k.a. A123).

Another takeaway from that interview, though, is that Brandt is the new CEO, and given his experience at Duracell and Varta, hopefully he'll move LTC in a more business/entrepreneurial direction. He seemed to express a desire for such a direction, at least.

In any case, here's a little summary of who has a contract with who:
  1. A123/Cobasys - contract for Chevrolet Volt, Saturn Vue, BAE Buses
  2. CPI - contract for Chevrolet Volt
  3. Johson Controls - contract for Saturn Vue
  4. LTC - ???
Why hasn't LTC won any contracts? Can Klaus Brandt snag a contract? There are numerous car companies, and surely someone besides GM is goibe handing out contracts for batteries, right? Maybe an upstart like Hyundai looking to upstage the big guys? Maybe some German company looking to leapfrog past normal hybrids and into the plug-in hybrid market? A123, CPI, and Johnson Controls can't win all the contracts--I would think that none of these alone have the capacity (and track record) to singlehandedly dominate the market. Surely there's enough pie for LTC to get a slice...

Disclosure: I don't own stock in any of the companies listed above, but I'm considering buying some LTC stock (LTHU on the Pink Sheets).