DETROIT – General Motors Corp. selects South Korea’s LG Chem Ltd. and its Compact Power Inc. subsidiary in Troy, MI, to supply lithium-ion cells for the upcoming Chevrolet Volt extended-range electric vehicle.

The auto maker also reveals at the North American International Auto Show here it will locate a manufacturing plant in Michigan to assemble the cells into the t-shaped battery pack for the Volt, pending the approval of state incentives.

“GM is back in the battery business,” says GM Chairman and CEO Rick Wagoner, in reference to the auto maker’s EV1 electric vehicle from 1996.

GM has not determined an exact site for the plant, but Gary Cowger, group vice president-manufacturing and labor relations, hints at the Southeast region, near the Volt’s assembly facility.

“We’re building the Volt at Hamtramck (a Detroit suburb), so it makes sense to put (the battery facility) in Michigan for logistical reasons,” he says. “The state also put together a good (incentives) package.”

Given the region’s strong organized labor background, the plant likely will be staffed with United Auto Workers union members, but Cowger says it’s too early to comment on the exact nature of the workforce.

GM will begin preparing the site in the coming months and anticipates adding production tooling at mid-year, with output starting in 2010.

The auto maker wants to bring the Volt to market by the end of 2010 as an ’11 model. GM already is building a plant in Flint, MI, to supply the Volt with its range-extending, 1.4L internal-combustion engine.

In addition, GM intends to build the largest battery lab in the U.S., likely in Michigan, as well, pending negotiations with the state. The 31,000 sq.-ft. (3,251 sq.-m) facility will test new energy-storage-system technologies, as well as Li-ion and nickel-metal-hydride batteries, to accelerate the domestic development of advanced-battery technology.

The new research center will lead a network of existing GM labs located in Honeoye Falls, NY; Warren, MI; Torrance, CA; and Mainz-Kastel, Germany.

GM also plans to ramp up its in-house battery expertise over the coming years by increasing the number of its engineers and technicians studying advanced-battery technology.

As such, GM says the final leg of its push into making batteries a core competency of the company will consist of a new partnership with the University of Michigan in Ann Arbor, MI, southwest of Detroit.

The partnership will consist of an automotive advanced battery lab and a specialized curriculum within the university’s engineering school to develop automotive battery engineers.

“This is the next step in the electrification of the automobile,” Wagoner says at today’s announcement.

David Cole, chairman of the Center for Automotive Research in Ann Arbor, underscores the significance of the news, which pushes the U.S. into competition with Asian nations currently leading in advanced-battery development.

“This is big news,” he tells Ward’s. “The timing for doing this is now, not after the world’s battery capacity is established elsewhere.”

Perhaps more importantly, Coles adds, GM’s aggressive decision shows it soon will produce the battery packs for vehicles such as the Volt, upcoming Saturn Vue plug-in and possibly the Cadillac Converj EREV concept unveiled yesterday, for less than $5,000.

Combined with a $7,500 tax credit GM believes the government will make available to buyers of electric vehicles, it signals GM may indeed bring the Volt to market for less than $40,000 as originally planned.

LG Chem has been competing for the contract over the last two years against a second team comprised of Germany’s Continental Automotive Systems and A123 Systems Inc. of Watertown, MA.

“LG Chem was just further along with its lithium-ion chemistry,” says GM Vice Chariman Lutz, who has guided development of the Volt.

Lutz also says LG Chem’s system was closer to meeting the scale GM needs for an automotive application. The agreement between the companies calls for LG Chem as the sole supplier of Li-ion cells to GM for an undisclosed number of years.

However, GM says it will continue to work with A123 Systems, which also is collaborating with Chrysler LLC on its electric-vehicle program and wants to build a plant in Michigan, as well as other battery companies as part of a new initiative to build a roster of suppliers and academic experts.

Lutz says the selection of LG Chem also demonstrates the lead Asian manufacturers enjoy in advanced-battery development and the need for America to enact a national energy policy placing it in a more competitive position on the technology.

South Korea, he notes, provided LG Chem with “massive support,” including bankrolling its R&D campus in the country.

“I’m hoping the Obama administration will understand and see that for the U.S. to become industrially competitive with the rest of the world again these are some of the types of things that need to be done,” Lutz says.

He also says the batteries within the Volt continue to meet all range and durability targets, with the only hiccups being mechanically related.