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Special Report: OAS-RA-13-10

February 8, 2013 

The Department of Energy's Management of the Award of a $150 Million Recovery Act Grant to LG Chem Michigan Inc

The Department of Energy's Vehicle Technologies Program was established to develop and deploy efficient and environmentally friendly highway transportation technologies to reduce the Nation's dependence on foreign oil and provide greater energy security.  The Vehicle Technologies Program received $2.4 billion under the American Recovery and Reinvestment Act of 2009 (Recovery Act) for these purposes.  In February 2010, LG Chem Michigan Inc. (LG Chem Michigan), formerly Compact Power, Inc., was awarded more than $150 million in Recovery Act funding to help construct a $304 million battery cell manufacturing plant in Holland, Michigan.  On October 24, 2012, a complaint was received that LG Chem Michigan misused Recovery Act funds.  The review confirmed the allegations.  Specifically, LG Chem Michigan inappropriately claimed and was reimbursed for labor charges incurred by a variety of supervisory and staff employees for activities that did not benefit the project.  As a result, up to about $842,000 in reimbursements for labor charges were questioned.  Also, work performed under the grant to LG Chem Michigan had not been managed effectively.  Based on progress to date and despite the expenditures of $142 million in Recovery Act funds, LG Chem Michigan had not yet achieved the objectives outlined in its Department-approved project plan.  For instance, even though the facility had produced a large number of test cells, the plant had yet to manufacture battery cells that could be used in electric vehicles sold to the public.  The problems identified occurred, in large part, due to grant monitoring issues with LG Chem Michigan and the Department.  In response, the Department concurred with the recommendations and indicated that corrective action had been taken and/or has been initiated to address the issues identified.

Topic: Financial Assistance