Categories: Business, News

General Electric announced Tuesday it’s cutting production and drastically reducing the workforce at the Schenectady battery plant it opened to much fanfare several years ago.

GE invested $170 million in the plant — which opened in July 2012 inside an old turbine factory on the company’s Schenectady campus — and promised to create 450 jobs by 2015. The hope was to transform it into the next billion-dollar business for GE.

But on Tuesday morning, the company announced to employees it will be reducing the production rate at the plant and moving a significant number of hourly employees over to the company’s steam turbine and generator manufacturing operation in Building 273, which needed help with additional volume and already had about 75 openings. The company is promising no layoffs from the massive transition, which will affect about 400 employees.

“That’s gigantic,” said Brian Sullivan, business agent for IUE-CWA Local 301, which represents more than 200 hourly workers at the plant. “Normally what happens is they get lack-of-work slips and they end up on the street. This is unprecedented. If they want a job, they’ll have a job. I’m a happy guy.”

But the downsizing is the opposite of what GE had hoped for its battery business. At the plant’s opening, GE Chairman and CEO Jeffrey Immelt predicted the business would reach $500 million in sales by 2015 and $1 billion by 2020. At full capacity, it would be moving 10 million battery cells a year, he said. President Barack Obama even heralded the technology during a visit to the Schenectady campus in 2011.

Company spokesman Nik Noel said Tuesday the company is not giving up on the business; it’s keeping a core team of at least 50 hourly employees at the plant. But he admitted the industry is still young and weak demand for the product late last year forced GE to re-examine the technology. He declined to discuss sales or production levels.

“The energy storage industry is still evolving, and customers are trying to determine the most economical way to make grid storage profitable to their organizations,” he said in a statement. “We are working through this journey with them, evaluating and determining the best technology and commercial strategy to meet their needs.”

The first wave of 50 hourly employees will be transferred to Building 273 on Feb. 2. Additional employees will be moved over through the end of March. About 180 hourly employees will eventually move over to the steam turbine and generator plant. Some will need training. More than half of them should actually receive slightly higher wages, Sullivan said.

Production on the Durathon, a sodium-nickel battery, began in September 2011, before the factory had officially opened. GE bought the technology from UK-based Beta R&D, which pioneered the development of sodium metal halide batteries in the 1980s. GE Global Research staff in Niskayuna helped refine the technology.

At its launch, GE hailed the technology as a breakthrough, citing its energy density, low toxicity and ability to be used at any temperature anywhere in the world. Originally designed to power hybrid locomotives and passenger vehicles, the batteries were eventually marketed to the telecommunications and electrical grid industries, where they could be used as backup power sources for cellphone towers or to support the grid. Its first customer was Megatron Federal in Africa, which ordered $60 million worth of batteries for telecommunication purposes.

It’s unclear why the battery technology has yet to take off, other than the fact that it’s still an infant technology, said Ravi Manghani, senior energy storage analyst for Greentech Media.

“Lead-acid and lithium ion have been the two go-to technologies of choice for the industry,” he said. “So it’s more likely a reflection on all emerging battery technologies than the sodium-nickel technology alone. Not a lot of investors will take a chance on something that’s still emerging or unproven.”

In some cases, new energy storage technologies simply need a few years’ worth of data to make their case to potential customers, he said. In this respect, startups are more likely to burn out on these ventures. Because GE is a multinational corporation with vast resources, it’s more likely than other companies to get its technology off the ground, he said.

“The whole market is shifting,” Manghani said. “It’s still too early to call a verdict over whether or not they can survive because we have seen failures in the markets, but it’s always boiled down to what kind of economic proposition they’re offering customers and whether the technology is inherently viable. On both notes, it’s still too early to call.”

Sullivan said GE choosing to transfer employees to another division so close by is a possible signal the company is still banking on the Durathon.

“They are still pursuing customers as we speak,” he said Tuesday. “They’re still trying to sell this product. So if they can sell it, they’re going to want those qualified people on staff to be able to go back over to the battery division if need be.”

Noel confirmed the company could move the employees back over to the battery plant if production picks up again. The employees have actually been out of work since September, after GE issued a temporary lack-of-work order. The company said it was the result of a furnace that broke and took longer than expected to repair.

“GE is still committed to the energy storage business,” Noel said. “Our goal is to build a long-term product and commercial strategy that better serves our customers’ evolving energy storage needs.”

GE received more than $25.5 million in federal tax credits to open the plant. The state doled out $15 million — $12.5 million from Empire State Development to help with renovations, site work and fit-up and $2.5 million from the New York State Energy Research & Development Authority. The Schenectady County Metroplex Development Authority awarded GE $5 million to help with project costs.

Metroplex Chairman Ray Gillen said Tuesday the grant will not have to be repaid, given GE’s commitment to retain the jobs.

“GE has exceeded both job and investment commitments related to the Building 66 project, which transformed an empty warehouse into a state-of-the-art, 190,000-square-foot manufacturing facility,” he said.