by Steve LeVine
But creating an anode was only the first step, Kumar continued to say. This being silicon, you had to carry out many additional procedures in the lab in order to make the anode usable. It required treatments, coatings, and nano-processing. That was why he regarded the anode as Envia’s. It was analogous to the Argonne cathode. Because Envia had optimized it, Kumar could legitimately call it proprietary.
Kumar asked Iyer to prevail upon Kapadia to withdraw his allegations about the anode. If Kapadia would do so, Kumar would apologize and make peace with the CEO.
It was a bewildering admission, and to Kapadia an altogether baffling justification when Iyer reported it to him. For two years, Envia had trumpeted its work on silicon. It had done so to potential customers, in particular GM, to peers at conferences, and to the world at large. The ARPA-E announcement was only the most-noticed version. Now one had to wonder what was true. Kumar had it wrong, Kapadia said. If Envia said that the anode material was proprietary, as it had done in its license with GM, then it had to have created the anode. If it was someone else’s, Envia was duty-bound to explicitly disclose that fact. The anode, plain and simple, was not Envia’s IP. Absent the anode, Envia was no better than the crowd. Panasonic, Samsung, and Argonne itself all were delivering energy density of 215 or 220 watt-hours per kilogram using a standard graphite anode. Kumar’s NMC cathode combined with a graphite anode—unactivated so as not to trigger the voltage fade—was not superior, not by more than a few percentage points anyway. Kapadia himself was at fault for championing the battery for so long despite the countervailing data and the complaints. But now he was going the other way: Envia, he said, should come clean in order to try to salvage the relationship with GM.
The Envia executives and board skirmished between and among themselves on what to do. Kapadia and Iyer insisted that the board allow them to go to GM and fess up. But the directors ordered a brave face and continued work. To Kapadia, Seegopaul seemed less concerned about the anode’s origins than that its discovery could upset the chances for his venture fund to cash out.
At the end of March, the two companies—GM and Envia—assembled for their first quarterly review. GM’s contingent was led by Matthus Joshua, head of purchasing for the company’s hybrid program, and Larry Nitz, its head of hybrid engineering. The GM men were blunt. In addition to the shortcomings of the ARPA-E material, Kumar had missed his very first milestone—the provision of one hundred kilograms of NMC cathode powder for the 2015 Volt. They asked Kumar what was going on.
Kumar responded that the problem with the cathode powder was temporary. There had been “a cross-contamination issue” and the Volt commitment would be met. The GM men were “dismissive [and] mocked Kumar,” Kapadia said later. They demanded that he reproduce the ARPA-E results.2 Kumar had lost credibility. This was not the friendly repartee of prior company-to-company talks.
As for Kumar’s story about chemical vapor deposition, the GM men said that if that was so, they wanted to see a full accounting of materials used in the anode.
Kumar conceded the true story as he had earlier with Iyer. With that, Kumar’s painstakingly presented picture fell apart. The vaunted silicon-anode performance was at best the flawed, undisclosed work of a Japanese American composite.
What was the answer for the GM men? One could be angry at what seemed a possible case of flimflammery. But from their perspective, how would that enable the vehicles on which a high-profile part of GM’s future—not to mention perhaps their own jobs—depended? If Kumar could step up and deliver the ARPA-E performance, GM could sort out the licensing of the Shin-Etsu anode, even if they’d come to it in roundabout fashion.
Joshua and Nitz gave Kumar another quarter. It was no longer important who had invented the silicon-carbon anode. The numbers were the crucial issue. If Kumar could produce the metrics boasted of at the Summit, all could be forgiven.
One thing was certain—none of this, nor the deal itself, was to go public. Nitz said, “The next cell—build or bust” for Envia.
Kapadia’s aggressive outing of the anode seriously strained his relationships within the company. He and Kumar now barely spoke. The board instructed him to restrict his activities to selling the company and resolving a lawsuit by Kumar’s former employer, NanoeXa. The previous month, NanoeXa CEO Michael Pak accused Kumar in a court claim of stealing intellectual property in order to create Envia’s cathode. Kapadia said it was a nuisance suit. But even a nuisance suit could complicate any sale of the company.
Kumar continued to dwell on the potential for a buyout and hence a big payday for investors and employees. July, he said, would be “a fork in the road” when Envia would have to make its decision on its new owner.
Goldman Sachs returned with gloomy news—as of now, no one was prepared to acquire Envia. LG and Samsung had declined almost instantly. Asahi Kasei, the most likely buyer, had also said no. One problem was that the word seemed to be out regarding Envia’s underperforming cells. Another was the general malaise hanging over electric cars—even if a big company might previously have been prepared to take a gamble, it was now less inclined given slow vehicle sales.
Kumar had three months of grace time.
43
The Big Man at Argonne
Amid the drama at Envia, President Obama paid a visit to Argonne. When the plans were announced, Lynn Trahey said to Gallagher, “I’m going to find a way to meet him.”
“Oh yeah?” Gallagher said. “Can I meet him, too?” He figured Trahey was blustering. But that evening, she e-mailed Matt Howard, Argonne’s public relations chief. The subject line was “I volunteer.” Trahey went on:
To spend as much time with Obama as you need me to next week. I know, I know, this is so selfless of me. I think he’d love to meet me! I am 100% available.
Howard replied: “Bribes.”
Trahey added rationale for putting her before Obama.
I’m a female in a land of men. He has daughters so seeing women in STEM will be very important to him. If Argonne is seen as a sausage party we’ll be in BIG trouble.
I’m in the Hub
I’ll blackmail you on bribes
I’m short so he’ll look tall and powerful in pictures.
“All good reasons,” Howard replied. Send me a biography and a photo, he went on. But no promises.
Gallagher received an e-mail from Howard, too. Isaacs had endorsed both Trahey’s and Gallagher’s participation in the Obama visit. They would demonstrate the lab’s battery work in a quick two or three minutes as Obama walked through the premises.
Isaacs added Thackeray’s name, which was natural. The only problem was that Thackeray was in Barcelona, being feted by the global battery community.
Two months earlier, he had undergone the surgery to remove his spleen. Now fully recovered, he had flown to Spain with Lisa and their three grown daughters, with whom he planned a subsequent vacation around Barcelona and on to London. Thackeray’s abdomen was flatter, his smile brighter. Flanked by his daughters, he watched at the Casa Convalescència as, one by one, the world’s battery geniuses took the stage to recall his achievements and his friendship. Goodenough, now ninety and caring for his ill wife, could not make it but wrote the frontispiece for the symposium program.
Thackeray took the stage. One thing he wanted to make clear was that this was not a retirement party. “You’re not getting rid of me yet,” he said. He choked up, talked a little bit more, then, along with Chamberlain, caught a flight back to Chicago. His family would go on without him to London. He wanted to be there for Obama.
The Argonne orchestration machine was in motion. For three days, it subjected Trahey and Gallagher to dry runs before fake Obamas starting with Elizabeth Austin, Isaacs’s staff speechwriter. They were coached on where to stand, what to say, and how to say it. The White House advance team showed up and ran Trahey and Gallagher through their lines again.
; The morning arrived. Accompanied by Crabtree, Obama bounded across the lab and up to the waiting young scientists. “These [are the] two hotshots here?” Obama asked. “That’s them,” Crabtree said. Trahey wore her blond hair down. She and Gallagher both dressed in their usual khakis. Each shook the president’s hand before Gallagher led off. He pointed to a battery, the Volt’s, which he said “was invented right here at Argonne,” then mentioned five-five-five, an account straight out of Crabtree’s Hub introduction. To create the kind of breakthroughs intended in the Hub, Gallagher said, “you need engineers like me working with materials scientists and chemists like Lynn Trahey.”
“My job is on the discovery side of things,” Trahey said, picking up the narrative. She handed Obama a coin cell while speaking of chemistry, and herself gripped an atomic-scale model of Li2MnO3 made of multicolored plastic beads. They exchanged some chit-chat. Then Obama was gone.
Minutes later, the president stood before a small, noisy crowd near the beam line. With a refrain on the global energy race, Obama unveiled a new long-term fund for energy research. “I want the next job-creating breakthroughs, whether it is in energy or nanotechnology or bioengineering . . . to be right here in the United States of America,” he said.
This was about standing behind inventions that might otherwise not happen. Obama said, “Two decades ago, scientists at Argonne led by Mike Thackeray, who’s here today. Where is Mike?”
A deer-in-the-headlights freeze crossed Thackeray’s face as he rose slowly up and out of his seat.
“Here he is right here,” Obama said, fixing a gaze on Thackeray. “Mike started work on a rechargeable lithium battery for cars. Some folks at the time said that the idea wasn’t worth the effort. They said that even if you had the technology, the car would cost too much. It wouldn’t go far enough. But Mike and his team knew better.” So went the story of the NMC and the Volt. Thackeray, still stone-faced, slid back into his seat.
Obama closed: “We don’t stand still, we look forward. We invent, we build, we turn new ideas into new industries. We change the way we can live our lives here at home and around the world. That’s how we sent a man to the Moon. That’s how we invented the Internet. When somebody tells us we can’t we say, ‘Yes we can.’”
It was hokey. A big cheer went up.
Afterward Trahey, cheeks crimson, said, “He stood this close. This close.”
“I’m on cloud nine,” Gallagher said. “It was an incredible experience.”
44
Second Quarter Review
Kumar said his team was “going crazy” attempting to meet the GM specs. The carmaker’s aim, he said, was to eliminate its development risk early in the production process so that after August 2014, its sole challenges would be to engineer the remainder of the car and sell it to a tough-minded public. But “it seems we overpromised,” Kumar said. “I have never built a team in a rush. It’s a recipe for disaster.” He thought he could reach 310 or 315 watt-hours per kilogram. That would involve blending the materials from the Volt cathode with those of the materials announced at ARPA-E. If GM wanted to do that, he could have the system ready for the 2016 model. But if the company wanted more, such as the promised 350 watt-hours per kilogram, that “will take another six months or a year,” Kumar said. At the higher 4.4 volts, the battery was still cycling just three hundred times. In other words, it would not be ready for the big launch.
He would raise this trade-off with GM when he had the chance. Kumar continued to sound hopeful about Envia’s general prospects. The payoff was only a matter of time. He said, “Most likely somebody will buy us out this year.”
GM and Envia held their second quarterly review in July. Kumar had again missed the milestones on both the Volt and the two-hundred-mile car batteries. He still could not get the 400-watt-hour-per-kilogram material to perform as advertised. The ARPA-E Summit was a long time back.
The GM men were furious. “The anode material is not Envia’s,” said Matthus Joshua, the automaker’s purchasing executive. Envia had “misrepresented the material.” Larry Nitz, the lead engineer, said Envia had earned “a failed grade for this quarter.” The meeting ended in acrimony.
Two weeks later, on August 7, a letter from Joshua arrived at Envia. Envia’s product claims prior to the contract “appear to have been inaccurate and misleading,” he wrote. The anode was represented as proprietary but was actually bought “from a third party.”
“Following Envia’s admission that it misrepresented the composition, origin and intellectual property content of the 400 wh/kg prototype battery, Envia requested that GM provide additional time for Envia to replicate its 400 wh/kg battery test results. . . .”
GM had provided that time. But, he wrote:
Envia has failed to move the project forward or replicate the results on a timetable that could conceivably support the vehicle development process. In fact, Envia was unable even to replicate prior reported test results even when utilizing the third party anode that had purportedly been utilized in the Arpa-E test battery.1
Joshua meant that even if Kumar could somehow later comply with the promised spec, even if he could later reproduce the ARPA-E result, GM lacked reasonable confidence that it would be ready in time for the 2016 launch. He did not speak of any fallback position for GM. Kumar’s private suggestion that they go to a 310- or 315-watt-hour-per-kilogram battery as an intermediate stage went unmentioned in his letter. Given the facts, he wrote instead, the automaker was entitled to terminate the contract. Toward that possibility, it was conducting an internal review—“necessarily re-evaluating its commercial relationship with Envia.” GM would notify Envia when the review was complete.
The deal was unraveling. GM said it wanted back the $4 million it had paid out. Envia itself was in turmoil: just eight months after the signatures, Kumar, Kapadia, and leading board members were at each other’s throats. The start-up had $2.1 million left in the bank, less than four months of operating expenses.
• • •
On August 29, 2013, Kapadia and Iyer caught a red-eye to Detroit. They would try to salvage whatever goodwill remained.
The next day at GM’s offices in the Detroit suburb of Warren, they met with a “visibly and justifiably angry” Joshua and Nitz. Kapadia tried to appeal to their sense of decency. Envia had committed mistakes, but the two companies should try “to mitigate the employment and immigration risk on the hardworking scientists at Envia who were likely to be adversely affected” if the start-up collapsed, Kapadia said. The GM men listened. There was no going back, they said—the carmaker was relinquishing the license for the 400-watt-hour-per-kilogram material. But they relented on the more onerous threats. Envia could keep the cash paid. They also signed a legal release—GM would not sue. That was the best they could do.
Kapadia and Iyer flew home, relieved. At least they would not end up in court. Nor would they be forced somehow to scrape together the $4 million.
The following day, the pair reported to the board. Hearing that the threat of a suit was lifted, the directors fired Kapadia, along with Iyer and Rohit Arora, the company’s chief financial officer.2
Purnesh Seegopaul, the Pangaea Ventures investor, assumed Kapadia’s duties. In a meeting with Iyer and Arora, Seegopaul said the business team had done “a poor job negotiating the GM agreement.” “The milestones in the agreement were very demanding and . . . no company in the world could achieve them,” he said. No one mentioned that nine months before to the day, all three men had been awarded stock options and promotions for a deal well negotiated.
Seegopaul told Kumar to get back to the lab, but under fresh marching orders—he was to make no further public announcements. No one outside GM, Envia, and its board—certainly not the Department of Energy or any reporters—was to know that the doubters about the little Newark start-up had been right all along.
45
Black Box
&n
bsp; Kumar blamed the mess on Kapadia, his first investor and the man with whom he had seemed to collaborate so well. During the entire negotiation, he now said, Kapadia and Iyer had run “a black-box operation.” Within Envia, they and only they were privy to the details of the deal. The business team had obligated Envia to unrealistic milestones and Kumar to an unattainable time line. The chance for an IPO was likewise squandered.
Kapadia’s team included “extra people we never needed,” Kumar said, his arms crossed. They were individuals “with a free mind doing nothing” who were responsible for “bad things.” Meanwhile, Kapadia had basked in the spotlight. “When something gets achieved, you see the CEO on CNBC. When it goes wrong, you blame the technology guys,” Kumar said. “They get the commission, we get the blame. It’s always like that.”
Thankfully, he said, the board understood what happened and sided with him: “I have a very good board. [Now] people are gone and I can get back to my technology.”
And the letter from GM’s Joshua and the claims of misrepresentation?
“GM is a large company,” Kumar said. “Even if you have one guy who says a bad thing, you can have twenty guys say good things.”
Kumar’s explanation was all but entirely false. The e-mail record showed that he approved the technological commitments and time line. When he spoke of having “overpromised,” the company truly had. But he led that act. All were eager for the deal and guilty of exuberant self-promotion. But Kumar—the company’s founder and the discoverer of the NMC in the Argonne catalogue—was the sole executive who knew what was possible. Kapadia and Iyer, in no position to offer expert opinions, checked the dates and material commitments with him. Kumar passed the judgment on which all relied.
Was Kumar a con man? Was he looking to cash out before he was found out? The Argonne guys—all of them skeptics from the time that Kumar began to boast about his big breakthrough—could not decide. Thackeray said Kumar was not a swindler but that, given the temptation to stretch the truth, a battery guy had to “know the difference between right and wrong.” Kumar clearly did not. Chamberlain said the truth was obscured by bad blood at the top, but that, if he had to choose who was more at fault, he would not blame Kumar but Kapadia. In his opinion, Kapadia did run a black-box operation, assuming haughty airs while providing no supporting data and demanding that a big American company buy his start-up. Gallagher wouldn’t really respond when you asked how he felt. He simply looked sad. “I told you so,” his expression said. Envia had fooled many, many people who should have known better. “What is it about humans that makes hype irresistible? Some sort of fundamental desire to dream?” Gallagher said.