Johnson Controls Inc. (JCI) will begin producing lithium-ion hybrid battery cells in Michigan next year after winning $148.5 million in state tax incentives.

The company, partnering with France's Saft Groupe (SAFT.FR), said it will spend $220 million to renovate a plant in Holland, Michigan to produce the batteries. Production should start next year with an initial output capacity of 15 million lithium-ion cells.

Johnson Controls' announcement, coupled with the tax credits, comes at a time when Michigan is struggling to stop the erosion of its manufacturing base and auto makers attempt to offer electric or hybrid vehicles that operate more efficiently, use less gas and have lower tail pipes emissions.

Other companies receiving tax credits Tuesday included LG Chem-Compact Power for a planned $200 million facility. The company produces cells for batteries used in the Chevrolet Volt, which is to go into mass production in 2010.

A123Systems Inc. is planning to build a facility in Livonia to supply Chrysler LLC, and KD Advanced Battery Group LLC, a joint venture with Dow Chemical Co. (DOW) will build a plant to make batteries for use in electric cars or hybrid vehicles.

Batteries made at Johnson Controls' Holland, Mich., site will likely be used to power Ford Motor Co.'s (F) plug-in vehicle, which is now slated to hit showrooms in 2010. Ford has selected the Johnson Controls-Saft partnership as its battery supplier.

About 500 jobs will be created, said Johnson Controls Power Solutions President Alex Molinaroli.

Johnson Controls' shares closed at $16.17, up 1.1%, and are unchanged in recent late trading.

   -By Jeff Bennett, Dow Jones Newswires; 248-204-5542;   jeff.bennett@dowjones.com