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INTERVIEW-GS Yuasa: Dreamliner battery snafu shows suppliers must be more active

Yoko Kubota and Yoshiyuki Osada
Thursday, 19 Dec 2013 | 4:03 AM ET

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KYOTO, Japan, Dec 19 (Reuters) - Japanese battery maker GS Yuasa Corp said suppliers should take a more active role to ensure their technologies work properly in new settings, after its batteries overheated and grounded Boeing Co's Dreamliner early this year.

The company, which is betting heavily on future demand in plug-in hybrid and electric cars and on new industrial applications for its loss-making lithium-ion batteries, learned important lessons from the Dreamliner incident, its president told Reuters in an interview.

"When a technology is going to be used in a new way, neither our customers nor we have much data on the environment under which it is going to be used," Makoto Yoda said.

"Instead of merely following instructions and making batteries, we should also study their instructions, collect data ourselves and make suggestions."

Yoda expects aircraft makers to use more lithium-ion batteries in future jets despite the Dreamliner's woes, given their light weight and high power output as well as the toxicity of conventional nickel-cadmium batteries.

"Jetmakers have to find some kind of an alternative and while it's unclear what that would be, nothing beats lithium-ion batteries when it comes to energy density and convenience," Yoda said.

Yoda reiterated that the troubles with the Dreamliner, which was grounded for three months early this year while the battery was redesigned, were not due to his company's manufacturing procedures. GS Yuasa makes the battery while France's Thales SA makes the related control systems.

Neither GS Yuasa nor Boeing have identified the cause of the problems. The U.S. National Transportation Safety Board is likely to compile a final report on the issue by around next autumn, Yoda said.

Future aircraft use of the batteries, he said, would depend heavily on Airbus, which in February opted for nickel-cadmium batteries in its next A350 passenger jet over lithium-ion batteries.

BANKING ON CARS

Lithium-ion batteries still account for only 5 percent of GS Yuasa's revenues and are losing money as the company recoups steep investment costs, though it expects to bring in profits in three years and boost revenue by six times so the segment accounts for 13 percent of the total revenue.

GS Yuasa, traditionally a lead-acid battery maker, is especially focused on carmakers and is already one of the largest suppliers of lithium-ion batteries to the auto industry, including Honda Motor Co and Mitsubishi Motors.

It is particularly hopeful for new business with European automakers, which are boosting output of plug-in hybrid vehicles as they come under pressure to reduce carbon emissions.

It has signed France's PSA Peugeot Citroen as a customer and will start manufacturing batteries for the Peugeot Partner and the Citroen Berlingo electric vehicles by March of next year. In addition to that, it plans to build a line at its plant dedicated to European carmakers.

It aims to win orders from three or four other European carmakers in the next three years, Yoda added.

But lithium-ion batteries for cars have also had their problems. GS Yuasa's battery melted in Mitsubishi Motors Corp's Outlander plug-in hybrid while other makers' batteries have overheated or caught fire in cars including the Tesla Motors Inc all-electric Model S.

Demand for all-electric cars has been slow to develop, however and GS Yuasa's lithium-ion battery segment posted a 11.2 billion yen ($108.5 million) operating loss last year.

Lithium-ion technology has been used widely in consumer electronics such as cell phones and laptop computers but is relatively new to industrial applications. ($1 = 103.2050 Japanese yen)

(Editing by Edmund Klamann and Jeremy Laurence)