DETROIT, March 17 (Reuters) - General Motors ( GM ) and battery partner LG Energy Solution are transforming an electric-vehicle battery plant in Tennessee to make batteries for energy storage systems, the companies said Tuesday.

GM and LG, through their joint venture Ultium Cells, will recall 700 laid-off workers to start production of lithium-iron phosphate batteries at the plant in the second quarter. Ultium in January laid off workers at the Tennessee plant and at another facility in Ohio through mid-2026 due to slower EV sales.

Battery producers are seeking solutions to address excess EV battery capacity, and energy storage is seen as a key option given the growing need for energy to support upcoming AI data centers. 

LG has been transitioning some of its EV battery capacity to energy storage batteries, and some competitors, including SK On, are doing the same after policy shifts under U.S. President Donald Trump hurt EV demand.

GM has pulled back on some of its EV production, lowering its need for battery cells. As a result, GM sold its stake in a Michigan battery plant to LG, and construction on another plant with Samsung in Indiana has slowed.

"We don't have enough demand to fill three factories," said Kurt Kelty, GM's vice president of battery, propulsion and sustainability, in a January interview with Reuters.

Kelty added that, in the energy storage market, "right now, the demand exceeds supply tremendously, and it's going to continue to exceed it for the next several years."