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Stimulus-funded battery maker’s failure another blow to Obama clean-energy plan
Question of the Day
The bankruptcy filing Tuesday by a startup electric-car battery company that received hundreds of millions of dollars of economic-stimulus funds from the Obama administration is the latest sign that the president's high hopes to spur a clean-energy economy is in big trouble.
A123 Systems Inc., the Waltham, Massachusetts-based company that received nearly $250 million in federal grant money in 2009, filed for bankruptcy after it failed to gain traction in an electric-car market that has been struggling to compete against the traditional combustion engines of the automobile industry.
This is the latest green-energy disappointment for the Obama administration, following Solyndra's bankruptcy in September 2011, which came just two years after the solar-panel maker received $535 million in loan guarantees from the federal government.
These high-profile green-energy failures may serve as an embarrassment for President Obama as he heads into the final weeks of his re-election campaign, some analysts say, and as a talking point for angry Republicans.
"I would call that a black eye," said Sean McAlinden, executive vice president of research and chief economist at the Center for Automotive Research, based in Ann Arbor, Mich. "But I don't think it will affect the election. They vote on bigger issues, like, 'Do I have a job or not?' or 'Should we have gone to war or not?' or 'Is my Social Security safe?' Not on if he spent some money on electric cars or not."
Republicans say this is another example of the Obama administration picking winners and losers. The Romney campaign has already jumped on the latest woes reported by A123 Systems.
Andrea Saul, a Romney campaign spokeswoman, blamed the Obama administration for missing its green-energy targets. The president set a goal of having 1 million electric vehicles on the roads by 2015, but so far the industry is lagging, having sold fewer than 50,000 of these cars since 2011.
"A123's bankruptcy is yet another failure for the president's disastrous strategy of gambling away billions of taxpayer dollars on a strategy of government-led growth that simply does not work," Ms. Saul said in a statement to reporters.
But Obama administration supporters say the failures of A123 and Solyndra are exceptions to the rule, and that the president's clean-energy initiatives are headed in the right direction. They also point out that the Bush administration gave money to A123.
"A123's promising technology has a long history of bipartisan support," Energy Department spokesman Dan Leistikow wrote today in a blog post. "In 2007, the company received a $6 million grant as part of the Bush administration's efforts to promote advanced battery manufacturing."
A123 was in talks to sell a majority stake to Wanxiang, a Chinese company, but the deal fell through, forcing it to pursue bankruptcy. Johnson Controls has stepped up to buy the electric-car battery company's automotive-business assets for a deal valued at $125 million.
"This action is expected to allow the company to provide for an orderly sale," A123 said in a press release.
Mr. Obama's support for A123 is well-documented. In September 2010, during an event to celebrate the opening of a new plant in Michigan that the company built with the federal grant money, Mr. Obama called to congratulate the battery maker.
"This is about the birth of an entire new industry in America -- an industry that's going to be central to the next generation of cars," he said in a phone call that was broadcast for everyone in the building to hear. "When folks lift up their hoods on the cars of the future, I want them to see engines and batteries that are stamped: Made in America."
But A123 was never able to move forward in the electric-car market, posting at least 14 consecutive quarterly losses. Shares were down to 24 cents from about $2 at the beginning of the year, before they bottomed out at 6 cents Tuesday on news of the bankruptcy.
The transition to a green economy hasn't gone as smoothly as the president would have liked. The Obama administration has faced criticism for the struggles of some clean-energy companies, among them Solyndra, Fisker Automotive, Tesla Motors and now, A123.
"You see the electric cars are dying in the market," Mr. McAlinden said. "Nobody wants to buy them. They cost too much. There's nowhere to recharge them. The general population isn't interested in electric cars at all."
Other analysts say critics tend to harp on the failures, but ignore the successes. "There's always a very strong focus on the businesses that fail, the ones that sort of blow up," said Nate Hultman, director of environmental- and energy-policy programs at the University of Maryland and nonresident fellow at the Brookings Institution.
Electric-car experts agree it will take more time for these vehicles to become a realistic option for most drivers. "I'm fairly confident that once people have the taste of what it is like to drive a reasonably priced electric car, many people will prefer that," Mr. Hultman said.
Phil Gott, IHS automotive analyst, pointed out that every new industry goes through growing pains. There have been more than 3,000 automobile manufacturers since the late 1800s, he pointed out, but only three have survived in Detroit. The electric-vehicle industry is going through the same process.
"It's the natural evolution," he said.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
About the Author
Tim Devaney is a national reporter who covers business and international trade for The Washington Times. Previously, he worked for the Detroit News, Grand Rapids Press, Portland Press Herald and Bangor Daily News. Tim can be reached at email@example.com.
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