A123's battery chemistry does have a disadvantage compared with some other types of lithium ion batteries, including cobalt oxide. It stores less energy, which would limit the range of a car. But Chrysler is making up for this in part by taking advantage of the battery's stability. Cobalt oxide deteriorates quickly if a battery is completely discharged and recharged; to make such batteries last longer and keep them more stable, they're typically electronically limited to using only half of their energy. But A123 says that its iron phosphate batteries can be discharged almost completely without degrading; the result is that more of the energy in the battery can be used. In Chrysler's electric vehicle, the battery pack can be discharged to 10 percent charge to provide a range of up to 200 miles--comparable to the range in similarly sized batteries with chemistries that store more energy.

At a press conference at the New York Auto Show earlier this week, Chrysler's president, James Press, emphasized that the cars will be produced domestically. "In our tradition of being the quintessential American company," he said, "we're partnering with A123 Systems, which is Massachusetts based, and we're going to build a factory in Michigan, and build all-American batteries for our cars."

The decision could help promote an advanced battery industry in the United States, assuming the foundering automaker can stay afloat. A123 Systems is building factories in Michigan to manufacture battery cells and modules and assemble these together to make battery packs, and Chrysler hopes to provide a market for those batteries.

Right now, almost all advanced battery makers build their batteries overseas, including A123, although it has a pack assembly facility in Massachusetts. The company has started construction on the first factory, with help from the state of Michigan, but David Vieau, A123's CEO, says that further help in the form of loans or grants from the federal government could help the company scale up its operations. A123 has applied for $1.8 billion under a loan program that was funded late last year. The company may also apply for grants made available under the stimulus package passed in February.