A123 Declares Bankruptcy, Failure Could Be Bad For Obama
The battery maker received $249 million in loans from the Department of Energy
As a recipient of $249 million in grants from the Obama administration, the company's bankruptcy will no doubt become another embarrassment heading into the November elections. Republicans have already battered the Obama administration for investing $535 million in solar panel maker Solyndra, only to see the company fail just two years after receiving the loan. The company shut its doors and fired all its workers in August 2011. But it is also litigating against Chinese solar panel makers, charging that China illegally "dumped" solar panels into the U.S. at a loss to drive makers like Solyndra out of business.
The U.S. has only paid out $132 million of the A123 grant, the Department of Energy said.
A123 won't suffer the same fate: It has already inked a deal to be purchased by Johnson Controls, and so it should stay open and functioning. And it will continue working on making a battery for General Motor's upcoming electric car, the Chevy Spark. But the bankruptcy could become another hammering point for Republicans who are trying to show President Obama's investment plans have not worked.
The battery maker was supposed to be a shining example of what could happen In April 2010, Obama welcomed the A123 CEO, David Vieau, to the Rose Garden to talk about how clean energy investments would help grow the economy. A123 had promised it would hire 3,000 workers in Michigan by the end of 2012, and open three new plants.
But the company has struggled in the past year after a costly recall put it back in the spotlight. The battery maker was forced to recall batteries used in the Fisker Karma electric car at a cost of $51.6 million, and that forced the company to halt production at its Michigan plant.
Clean energy investments were supposed to be Obama's version of the New Deal, pushing government money into industries that could move the economy forward. But consumer acceptance of electric cars has been slower than expected, resulting in excess supply of expensive battery packs.
Consumer demand is slowly ramping up, but it's not meeting the targets set by Obama's administration.
According to the MIT's Technology Review, the projections for demand far outweigh reality. By 2012, battery makers could have produced 3,900 megawatt hours worth of battery power. But there was demand for just 390 megawatt hours.
"It's still early days for electric vehicles, but the idle factories point to the difficulty of starting a new high-tech industry from scratch," the magazine wrote.
In a blog posting published Tuesday afternoon, the Department of Energy defended its investments in electric battery makers. The policy has had bipartisan support, and investments in battery makers began under the Bush administration.
"Four years ago, virtually all advanced vehicle batteries were built overseas, and it looked like the United States might miss out on this enormously important, rapidly expanding market," said Dan Leistikow, head of public affairs for the DOE, in the blog posting. Thanks to investments in battery makers, the cost of large batteries has gone down from $33,000 to around $17,000, he said.
"Most importantly, more and more of those cars and their components will be built right here in America – continuing to support American workers and new technologies that will reduce our dependence on foreign oil," he said.
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