Published in Economic Development
LG Energy Solution Michigan Inc.’s Holland headquarters. LG Energy Solution Michigan Inc.’s Holland headquarters. COURTESY PHOTO

LG CHARGES UP: Advanced battery manufacturer’s $1.7B Holland expansion likely to benefit region’s automotive supply chain

BY Monday, March 28, 2022 11:07am

HOLLAND — LG Energy Solution Michigan Inc.’s planned $1.7 billion lithium-ion battery manufacturing expansion is poised to spur further opportunities as the company taps new and existing suppliers to support the project.

As the state last week  approved a variety of grants and incentives for the project, LG Energy Solution revealed its plans for the expansion on vacant land the company already owns.

The expansion calls for several new facilities totaling 1.4 million square feet — five times the size of the company’s existing Holland footprint — to support the manufacturing of battery components for electric vehicles. The project includes a main manufacturing facility, material storage sites and a disassembly lab.

The Michigan Strategic Fund approved $56.5 million in various grants as well as a 20-year renaissance zone valued at roughly $132.6 million to support the project, which could create up to 1,200 jobs.

And while the 1,200 direct jobs are tied to the incentive package, the massive expansion will likely stir up significant economic activity as LG looks to build a supply chain to support the endeavor. The $1.7 billion price tag is more than five times the size of LG’s initial Holland investment in 2009.

“What I would expect is to start seeing companies within LG’s supply chain wanting to either relocate and establish locations in Holland and the surrounding areas or an expansion of operations into the area,” said Amanda Murray, vice president of business solutions for economic development organization Lakeshore Advantage, which works with businesses in both Allegan and Ottawa counties.

In fact, Murray and her team have watched this scenario play out even before the expansion project. About a year ago, the organization worked with a company that produces foil for LG’s battery packs. The company was looking to establish a presence in Holland to be closer to LG’s growing footprint in the area.

While that specific project failed to materialize, Murray said it highlighted the fact that suppliers will find benefit in establishing operations in close proximity to the giant battery maker.

Local first?

While LG’s massive expansion might lure outside companies to the area, it also signifies opportunity for local businesses. LG Energy Solution maintains relationships with several local suppliers, including Grand Rapids-based commercial HVAC firm Quality Air Heating & Cooling, Holland-based electrical contractor Polarity Electric and mechanical contractor Andy J. Egan Co., to name a few.

As LG Energy Solution’s supply needs grow, Murray said it wouldn’t be out of the question for the company to begin by looking in its West Michigan backyard.

“I don’t have a crystal ball, but just with the investment that LG is looking to put in, a lot of times manufacturers look to local suppliers,” Murray said. “It helps with (lower shipping times) — they’re closer. We’re in a day and age when the supply chain is near the top, if not the biggest challenge, going on. Having those suppliers nearby has become more important.”

Lakeshore Advantage President Jennifer Owens has said her organization expects around 600 spinoff jobs as a result of the expansion. Owens was unable to go into detail on how many of those would be concentrated directly in Holland or West Michigan, indicating they could be scattered across the state and the Midwest.

“We have a strong supply base and from a company’s perspective, in most cases, they would want local suppliers,” Owens said. “It’s less time and less costs, so hopefully a good chunk of (the spinoff jobs) would be in West Michigan, but they have to make the decisions that are right for them and choose the best components for their projects.”

Mike Wall, auto analyst for S&P Global Inc., formerly IHS Markit, highlighted the fact that LG’s expansion facility will be used for multiple purposes — manufacturing, material storage and disassembly — meaning even more opportunity.

“This isn’t just putting together battery packs,” Wall said. “You’re going to have some other disciplines involved and you can definitely see some opportunity for suppliers in some of the other roles to play a supporting role to LG in this whole process.”

“It may even be some non-traditional suppliers — folks we don’t even see in the area and are entering the market to support this. It’s a great win for the region and the area,” he added.

The COVID-19 pandemic has ravaged supply chains for manufacturers, creating a variety of logistical headaches. The LG expansion comes as manufacturers across the United States are scrutinizing their supply chains and, in many cases, working to keep their suppliers as close and accessible as possible.

This timing could be of major benefit to West Michigan-based companies that might be vying to support LG’s new expansion project.

“There is a benefit to having a robust supply chain in your backyard,” Wall said. “When you look at how everyone is recasting their supply chain and understanding supply chain risk, I do think there is some benefit from a proximity perspective. But the upper Midwest or general Midwest will certainly be within the game, as well.”

A ‘driving force’

While Holland’s vibrant advanced energy cluster makes West Michigan a viable candidate for future investment in this space, the region is not alone. 

Other states have reeled in similar mega projects, like Ford Motor Co.’s announcement last year that it, along with partner SK Innovation Co., will invest $11.4 billion and create 11,000 jobs in Tennessee and Kentucky to build facilities that manufacture both electric vehicles and batteries. A day after Michigan officials approved LG Energy Solution’s incentive package, the company announced a separate joint venture with Stellantis NV on a $4.1 billion battery manufacturing plant in Windsor, Ontario.

“There is a benefit of developing a regional center of excellence around (advanced energy) and having a supply base installed that is tailored to supporting it, but that’s happening in multiple states,” Wall said. “There are a lot of states that are now boasting that very same thing. Still, this is a big help for us.”

While LG might anchor Holland’s advanced energy cluster, the battery giant certainly has company with additional energy and energy systems makers in Clarios LLC, DC Battery Hub LLC, Volta Power Systems LLC, Jolt Energy Storage Technologies LLC and Global Battery Solutions LLC. These industry peers also could benefit from the resources that LG’s expansion project will attract to West Michigan.

“We are really grateful to see this continued investment in the advanced energy cluster for our region, solidifying West Michigan as a driving force in the industry,” Jack Johnson, founder and chief technology officer of Volta Power Systems in Holland, told MiBiz. Volta supplies OEMs in the RV, marine, trucking and other industries with energy storage systems to hybridize vehicle operation.

“LG’s expansion will also bring even more lithium-ion knowledge and talent to Holland, which is a benefit to all of us,” Johnson added. 

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