Lithium-ion batteries are prone to failure, because both their capacity and rate capability decrease with cycling. Side reactions, which decrease the cell's cyclable lithium content, can be responsible for capacity fade. An increase in cyclable lithium content is also possible, but is limited by the initial overall lithium content. Formation of a solid electrolyte interphase film on the carbonaceous anode not only consumes cyclable lithium, but also increases the anode resistance, thus reducing the rate capability of the cell, as demonstrated via computer simulation of a lithium-ion cell. Simulations also suggest that the use of cutoff potentials may not effectively prevent undesired irreversible side reactions on overcharge or overdischarge. (C) 2003 The Electrochemical Society.