One of the companies GM had considered as a battery-cell supplier for its Volt plug-in hybrid will manufacture the batteries for five plug-in hybrid and electric vehicles to be sold by Chrysler–if the automaker survives its current troubles, that is. The first of these vehicles is slated to be available in 2010.

The company is A123 Systems, a startup based in Watertown, MA, that makes lithium-ion batteries with a chemistry that it says is safer, more powerful, and longer lasting than the lithium-ion batteries now used in portable electronics and some electric cars. Its battery cells are used in power tools and in enormous, tractor-trailer-sized battery packs used to help stabilize the electrical grid. GM partnered with the company to develop automotive batteries, but then decided to go with a more established company, LG Chem, to supply the batteries for the first version of the Volt.

The announcement that Chrysler will use A123’s batteries could be a strong political move. The company has already received billions from the government, and to get more money, it will probably need to partner with Fiat. By going with A123, Chrysler could be strengthening its case to get more government help. That’s because the move is in line with funding in the stimulus package signed into law in February. One of the goals of that bill is the development of an advanced battery industry in the United States. Right now, almost all advanced batteries for cars are made overseas, particularly in Asia. A123 Systems is a U.S.-based company, but it currently makes its battery cells in Asia, in part because of manufacturing incentives there. The deal with Chrysler, combined with money from the stimulus bill and other related bills, could allow it to set up battery-cell manufacturing in the United States. A123 already assembles its battery cells into larger packs in the United States, and it has applied for $1.2 billion in government loans to build factories in Michigan–a fact highlighted in Chrysler’s announcement.