by Steve LeVine
Five days later, Isaacs stood before the whole of the Battery Department and the larger Hub team. They were gathered at the lab guesthouse for wine and hors d’oeuvres. Isaacs thanked each of the main actors by name. He told the story of how, after Argonne had lost the three big prior competitions, Bill Madia had said, “What the hell is wrong here?” Madia had not necessarily discovered what went wrong, Isaacs said, “but he did figure out how to do it right.” The group shared a big laugh over the story of Emanuel’s claiming credit for himself.
Just beforehand, Thackeray had passed Isaacs in the corridor. The director had looked at the battery genius and flashed five-five-five on each hand, one after the other, before going on and out the door. Thackeray laughed.
41
Deal
About five hours after the ceremony at the University of Chicago, Atul Kapadia and Sujeet Kumar hosted the Envia staff at a Palo Alto restaurant for the annual holiday party. The pair had been waiting for days for General Motors to e-mail a contract, only to go home without it. The talking had gone on so long and with such uncertainty that neither man had even told the scientists that they seemed to be on the verge of their first licensing agreement. Even if they felt more confident, they could not have said anything, since such news could affect GM’s share price. But word had leaked around the Newark lab anyway. An edginess hung over the lunch.
Three months earlier, GM CEO Dan Akerson had himself described Envia’s exploits in a closed meeting of the carmaker’s employees: in just a couple of years, he said, Envia had created a breakthrough battery that was certain to power an electric car a hundred miles on a single charge. And “we’ve got better than a fifty-fifty chance to develop a car that will go two hundred miles on a charge,” Akerson said. That longer range could be achievable by around 2016, which, he said, “would be a game changer.”
Akerson believed GM and Envia were partners in this potentially world-beating push to the future. “These little companies come out of nowhere and they surprise you,” he said. He did not reveal the tense licensing negotiations under way. But, back at Argonne, Thackeray suspected something afoot when he read of Akerson’s remarks, which had leaked. He said, “I believe that Envia may announce a deal soon—perhaps an order?”
A month later, Hari Iyer, Kapadia’s deputy for the GM account, had begun to circulate proposed contract language among the senior Envia executives: “supplier manufactures lithium-rich layered-layered composite cathode materials and silicon-carbon anode materials for use in high-performance rechargeable electric battery cells.”
“I am okay with it,” Kumar responded to the September 27 e-mail.
The draft contract went on to be quite specific: Envia was to provide a working 350-watt-hour-per-kilogram battery that could endure one thousand charge-discharge cycles. The requirement was not 400 watt-hours per kilogram—what you achieved in a cell could never be matched when you scaled up to the battery pack that actually went into a car. But it remained a tremendous challenge, since Kumar still had to overcome the silicon expansion on the anode side, along with the old issue of DC resistance in the cathode. The deadline was October 2013. After that, adjustments could be made to optimize the performance until August 15, 2014. But that was a full-stop deadline—Kumar could make no changes to the battery after the latter date. This point was critical to GM because once the battery was known to be in place, all the other deadlines could follow, ending with the 2016 launch of an electric car with two hundred miles of range on a single charge. As with the more reasonable demand for a 350-watt-hour-per-kilogram battery, GM was aiming not at the three-hundred-mile car of which Kumar had spoken in Orlando.
“I am fine with the deliverable and time line,” Kumar wrote Iyer on October 25.
While the lawyers continued to talk, GM was becoming nervous. In addition to the two-hundred-mile electric into which the 350-watt-hour-per-kilogram material would be placed, GM had to place Envia’s other advances into production for the 2015 model year Volt. It was understandable why Envia insisted on keeping its signature ARPA-E material under wraps until the contract was signed—it was too valuable to let out. The start-up was almost obliged to allow no one direct access to the material. But GM wanted Kumar and Kapadia to brief LG, GM’s battery cell manufacturer, on the lower-level NMC cathode, the one that would go into the 2015 Volt.
It was still an unusual request: suppliers did not ordinarily open up their proprietary inventions absent a sealed contract. Much could go wrong with a deal even in advanced negotiations. But the Envia men said they had no problem with the favor, given the goodwill between the two companies. Envia disclosed the secrets behind the plug-in hybrid version of its NMC, a configuration that reduced the cost of the cathode 30 percent, to $230 or $240 per kilowatt-hour. That could allow GM to immediately reduce the price of the Volt by $3,000 or $4,000.
GM and Envia continued to haggle over how and when to announce the deal publicly. One idea was for the main players to assemble for a ceremony either outside Detroit or in Newark. That suited Kumar and Kapadia, who were eager to get the news out because the publicity could induce Honda and possibly Toyota to sign follow-on licensing agreements. GM, however, worried about the politics—Republicans still relentlessly labeled the Volt the “Obamamobile” and stigmatized electrics generally as publicly subsidized playthings of the liberal elite. The carmaker said it would delay public disclosure of the deal until after the presidential election.
As the election passed, the lawyers were still swapping sentences without closure, but a couple of weeks later, they seemed to have arrived at an acceptable version. Crucially for Envia, it would receive $2 million a quarter, adding up to $8 million a year, for at least four years. It was sufficient to pay all of its bills—its entire burn rate. On top of that would be royalties once the cars began to be manufactured. In all, the deal would run for eighteen years. Depending how many cars were sold, the deal could be worth hundreds of millions of dollars. The board was delighted. It awarded new stock options to twenty-five employees, about 45 percent of them to the three-man business team led by Kapadia, and promoted Hari Iyer to vice president.
So much time had passed, however, that there seemed no way to schedule a formal signing event. Given the stringent deadline, every day counted. So the document would be signed by GM without public fanfare at its Warren, Michigan, office, then e-mailed to Kapadia for his signature.
The Envia men waited.
Kapadia’s cell rang as he drove back from the holiday party. It was General Motors: senior management had finally signed the documents. They were on their way by e-mail. Kapadia turned off the phone.
A regular office meeting had been scheduled back at Envia. Kapadia said it would be delayed a few moments. He tried not to let on.
In the conference room, some papers lay on the table before Kapadia. It was the company’s first licensing deal, he said—with GM. “I always knew that Sujeet would build a special technology. He is a special guy,” Kapadia said. Kumar and his team had a lot more work to do if the 350-watt-hour-per-kilogram battery was to become reality and enable electric cars. But “the only company that has any chance of getting to that promised land is Envia,” he said. Only Envia could change the world. “Just to let you know, this is not my achievement. This is your achievement. And I am signing on behalf of you. I want to sign here in front of you guys.” Kapadia bent over and initialed the papers.
The room erupted. The three dozen scientists and staff catcalled and screamed. They jumped up and down. To some of those present, the tumult sounded like two hundred people.
Now Kumar spoke directly to his scientists. “The business guys have delivered. I have never seen a business team deliver like this. Now it is our time. The onus is on us,” he said. “There are no excuses. Get this done. Put the chemistry in the car. Whatever small issues are remaining need to be solved in the coming year.”
Days later, Kumar said
he was “very happy” with the contract. The months ahead would be “pretty tough,” he said. “I would say the time line is aggressive.” But after all the make-work deals in which Envia was producing tiny batches of material for coin cells and enduring excruciating scrutiny, he had finally proven himself. The company was earning serious revenue. It was no longer a start-up on the come. Envia had arrived.
42
The News from Envia
The day after the deal closed, Kumar received an e-mail from Damon Frisch, his GM program officer. Frisch would arrive in Newark two days later—on Monday. He would have his entire team with him. They would start work immediately.
The idea was to begin with the launch date—2016—and work backward. Over the following two days, Frisch, Kumar, and their teams would go through every major step of the laboratory process until they had a meticulous schedule of milestones. In just twenty months, this time line would deliver the central nervous system for the electric that Dan Akerson had promised his employees.
Such painstaking planning was vital from GM’s perspective because most cars did not earn large margins for their manufacturers. If GM was to profitably make electrics, there was very little room for error. Kumar said that to deliver the required performance, he would have to start with a better understanding of his materials, using equipment he did not currently possess. He would require access to either synchrotron radiation or neutron diffraction capability, either of which would permit him to peer deeply into his battery. Only the national labs had this capacity—the beam lines at Argonne, Lawrence Berkeley, and Oak Ridge. Kumar would need to obtain beam time and to do so absent the usual three- and six-month-long waiting times.
It would help if GM finally announced the deal. That would supply Kumar the credibility to enter into a conversation with the labs about beam time—to request and be granted favors from them. He thought the labs should waive the usual fees given the industrial and corporate stakes. “I feel this should be a national mission,” Kumar said. The national labs should treat the NMC 2.0 and the silicon-carbon anode as priorities. “Why shouldn’t they work on something that has an American company and is to America’s advantage?” he said. “Why shouldn’t they analyze my material as opposed to publishing many, many papers that are fantastic scientifically but don’t help American industry?”
The GM and Envia teams endorsed the schedule. Now Kumar embarked on the dizzying sequence of milestones. He assumed that disclosure of the deal would follow more or less immediately in order to provide him some negotiating traction with the labs.
Kapadia figured the deal would be made public by early January at the latest. He reckoned on a resurrection of the previously discussed public ceremony; seeing as how the two-hundred-mile car would validate Obama’s goals set out three years before, the White House itself might participate in the news conference. That would help his own efforts. As Kumar advanced on the GM contract, he moved forward on the plan to allow Envia investors to cash out. There no longer seemed to be time to launch an IPO. It again seemed much more sensible to find a buyer. Potential American purchasers remained cautious, so Goldman Sachs took the acquisition proposal to Asia, sending queries to, among other suitors, Japan’s Asahi Kasei and South Korea’s LG and Samsung. These companies had to feel that time was of the essence—that Envia could be swept up any moment by a rival. The GM deal would help create that impression.
But GM again said the announcement had to wait. There was an electronics show the first week of December, which was not a good time for the disclosure. Then the Detroit auto show—also not ideal. After that, Envia, LG, and GM were to be occupied in a brainstorming session in Detroit. That would push back the announcement to the third week of January. Then there was the second Obama inauguration. Which made the latest plan to wait until the next ARPA-E Summit, in February. There would be something poetic about that date given the announcement at the last Summit.
GM was not announcing the deal but neither was it moving back its time line. The deadlines to deliver the working battery remained etched in stone. “I feel pressured,” Kumar said. He had to find and hire a structural cathode scientist, someone like Jason Croy who was familiar with the beam lines. Since A123 had declared bankruptcy, Kumar figured that he could raid it for at least some of the ten or fifteen scientists he required. He would place an ad and start making calls.
The ARPA-E Summit passed without an announcement. But toward the end of February, Hari Iyer received an urgent e-mail from General Motors: it had finished initial tests on Envia’s 400-watt-hour-per-kilogram battery. So far, they had failed to replicate the results announced at ARPA-E. No remedy seemed to work. Could Envia explain why?
Increasingly concerned queries piled up during routine conference calls and meetings with the GM team over the next week. The cell was not reproducing the ARPA-E results. It was supposed to be delivering 400 watt-hours per kilogram, and it wasn’t—not by a long shot. Iyer asked Kumar, who shrugged off his questions. Iyer approached members of the scientific team. Finally he went back to Kapadia. Iyer said, “Perhaps what we told the world and GM isn’t what it is.”
Kumar’s technical team in fact had an inkling of what GM was finding. Two weeks after the ARPA-E Summit the previous year, they had sent another cell to Crane for evaluation. When the result was returned to Envia, it verified the 400-watt-hour-per-kilogram claim—but only on the second cycle. After that, the energy density plummeted. By the fifth cycle, energy density was down to 302. On the hundredth, it was at 267. By the two hundredth, it had dipped to 249, and on the 342nd cycle—the last listed—energy density was at 232. The cell had lost 42 percent of its energy and showed no sign of stabilizing.1 But the GM team seemed not to achieve even two cycles of the 400-watt-hour-per-kilogram performance.
As part of his explanation for the battery’s problems, a staff scientist had told Iyer something unnerving. Envia, he said, was not the inventor of the 400-watt-hour-per-kilogram battery touted at ARPA-E. Not of the entire technology, anyway. The NMC cathode was legit—Envia, as it had told everyone, had transformed the Argonne electrode into an optimized, top-of-the-line product. But not the silicon-carbon anode—the flaunted component that lifted the performance of the battery as a whole was not Envia’s invention.
A year before, cofounder Mike Sinkula had told Kapadia that the anode contained material from a Japanese supplier. Kapadia had dropped the subject after it was waved away as unimportant by Purnesh Seegopaul, the materials scientist on the board of directors. But this fresh claim, heard as GM was raising a fuss, assumed a different meaning. It could not be ignored.
Iyer again confronted Kumar, who said that what he heard was wrong—the anode was Envia’s. He was shipping out the anode for treatments such as chemical vapor deposition, the first of five discrete production processes to which the electrode was subjected. The anode was going to Japan for that purpose. It was all routine stuff.
The explanation made sense—much went into the creation of an advanced electrode. If an outside supplier painted a GM car, for instance, no one would challenge the assertion that it was in fact still a GM car. So it was with the anode. Kumar said Envia did the work that mattered.
Kumar said that the most pressing problem was not the anode, but how much voltage GM insisted on applying to the battery. The greater the voltage, the more lithium began to shuttle between the electrodes and the farther a car could go on a single charge. That was the idea behind activating the NMC at 4.5 volts and thus transforming it into NMC 2.0. But such higher voltages also stressed the material and made the Argonne battery fail—it was what caused voltage fade. Kumar wanted to stay well away from the stress limit. For ARPA-E, he had pushed the voltage as high as he dared—to 4.3 volts—and at that level managed to cycle the battery 450 times; to meet GM’s specs, he would have to more than double that to 1,000 cycles, but Kumar was confident he would succeed.
Only, after the deal was signed, whe
n the GM and Envia engineers sat down to map out the work to come, the carmaker surprised him by insisting on the application of 4.4 volts. While that tenth of a volt may have seemed only a tweak, its impact was magnified on the atomic scale. At that state of charge, atoms began to move around at an accelerated pace, the cathode expanded and contracted with the shuttling of the lithium, and ultimately the material could crack. You began to lose electrical contact between the particles that make up the cathode. Kumar began to achieve at best three hundred cycles, much further from the thousand that he needed. Now his team had not to double the battery’s longevity, but to triple it.
Kapadia remained suspicious. On March 7, 2013, he briefed the Envia board about their primary customer’s unhappiness with the signature product and the doubts about the anode. In an e-mail, he said, “GM has observed a significant and very large disparity between the data obtained from Arpa-E cells and proof of concept cells based on [the] 400 wh/kg technology we sent them for testing.” Until the performance questions were resolved, there should be no further discussion of any news releases or contract ceremonies, Kapadia said.
A week later, Kumar held a heated meeting with Iyer. Kumar disparaged Kapadia for putting his concerns in writing, which made them legally “discoverable”—any potential buyer of Envia would have to be provided such internal correspondence during the due diligence process. It was a bizarre outburst. Iyer said, “If there were no misrepresentations, you should not worry about Atul putting these issues in writing.”
Kumar broke down and told the truth: the anode—the one used in the ARPA-E battery and shipped a year later to GM—hadn’t been serviced in Japan. It had been bought there. What Iyer heard was true. The anode was made by a company called Shin-Etsu.
