GM to buy Cobasys to secure hybrid future

Earlier this week we brought you news of GM's recall of 9,000 hybrids due to leaky batteries supplied by Cobasys.

Now it looks like GM may buy the battery maker from joint owners Chevron and Energy Conversion Devices (EDC) to help smooth out its supply chain. If it does acquire the battery maker, it can get more involved with the production process to help prevent future recalls.

The buyout is being considered because Cobasys is having financial difficulties and GM desperately needs the company's product to continue building its mild hybrid line-up. That line-up of hybrids is becoming more central to GM's bottom line every day, and future hybrid production is just as important to the maker.

Buying Cobasys would prevent a shutdown which would leave GM searching for a new source of the in-demand batteries while its production lines idled. This worst-case scenario isn't as unlikely as it might seem. Apparently Cobasys' financial problems are severe, and GM's current product line-up isn't suitable to a mid-cycle battery swap, according to Automotive News. That would mean GM could potentially be stuck without hybrids until 2010, a disastrous outcome.

The problems at Cobasys go beyond the bottom line, however. The two owners have been arbitrating a fight over the company since last September. Chevron has since accused ECD of failing to fund Cobasys adequately and of not honoring Chevron's preferred interest in Cobasys. Still, the money matters are also an important part of the situation: Cobasys loss $76 million last year and will lose $6-8 million more this year for a total lost of at least $82 million.