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Stimulus-funded battery maker’s failure another blow to Obama clean-energy plan

  • In this April 30, 2010, file photo, from right, A123 Systems, President and Chief Executive Officer David Vieau, A123 Systems electrical engineer James Fenton and A123 Systems design engineer Antonio Biundo, stand next to President Barack Obama, as he speaks in the Rose Garden of the White House in Washington. Short of cash and hurting from slow sales of electric cars, battery maker A123 Systems Inc. sent its U.S. operations into bankruptcy protection on Tuesday, Oct. 16, 2012, and quickly sold its automotive assets. The filing is likely to stoke the debate in Washington over the Obama administrationís funding of alternative energy companies. In 2009, A123 got a $249 million Department of Energy grant to help it build U.S. factories. Republicans have accused Obama of wasting stimulus money on the companies after the failure of politically connected and now-bankrupt solar power company Solyndra LLC, which left taxpayers on the hook for $528 million. (AP Photo/Haraz N. Ghanbari, File)In this April 30, 2010, file photo, from right, A123 Systems, President and Chief Executive Officer David Vieau, A123 Systems electrical engineer James Fenton and A123 Systems design engineer Antonio Biundo, stand next to President Barack Obama, as he speaks in the Rose Garden of the White House in Washington. Short of cash and hurting from slow sales of electric cars, battery maker A123 Systems Inc. sent its U.S. operations into bankruptcy protection on Tuesday, Oct. 16, 2012, and quickly sold its automotive assets. The filing is likely to stoke the debate in Washington over the Obama administrationís funding of alternative energy companies. In 2009, A123 got a $249 million Department of Energy grant to help it build U.S. factories. Republicans have accused Obama of wasting stimulus money on the companies after the failure of politically connected and now-bankrupt solar power company Solyndra LLC, which left taxpayers on the hook for $528 million. (AP Photo/Haraz N. Ghanbari, File)
  • This Thursday, Aug. 6, 2009, file photo, shows A123 Systems Inc.'s high power Nanophospate Lithium Ion Cell for Hybrid Electric Vehicles batteries in Livonia, Mich. Short of cash and hurting from slow sales of electric cars, battery maker A123 Systems Inc. sent its U.S. operations into bankruptcy protection on Tuesday, Oct. 16, 2012, and quickly sold its automotive assets.  The Chapter 11 filing in Delaware came one day after A123 warned that it likely would miss some debt payments and could be headed for court-supervised restructuring. (AP Photo/Paul Sancya, File)  This Thursday, Aug. 6, 2009, file photo, shows A123 Systems Inc.'s high power Nanophospate Lithium Ion Cell for Hybrid Electric Vehicles batteries in Livonia, Mich. Short of cash and hurting from slow sales of electric cars, battery maker A123 Systems Inc. sent its U.S. operations into bankruptcy protection on Tuesday, Oct. 16, 2012, and quickly sold its automotive assets. The Chapter 11 filing in Delaware came one day after A123 warned that it likely would miss some debt payments and could be headed for court-supervised restructuring. (AP Photo/Paul Sancya, File)
  • An A123 Systems Inc. logo is seen in a Thursday, Aug. 6, 2010, file photo in Livonia, Mich. A123 Systems says Tuesday, Oct. 16, 2012, that a default on some of its debt is likely and it may be heading for bankruptcy protection. (AP Photo/Paul Sancya, File)An A123 Systems Inc. logo is seen in a Thursday, Aug. 6, 2010, file photo in Livonia, Mich. A123 Systems says Tuesday, Oct. 16, 2012, that a default on some of its debt is likely and it may be heading for bankruptcy protection. (AP Photo/Paul Sancya, File)
  • In this Aug. 9, 2007, photo, development technician Ronnie Wilkins reaches for some development powder stored in a glove box used in lithium car batteries A123 Systems Inc. headquarters in Watertown, Mass. After years of struggling with weak sales and mounting losses, the electric-car battery maker filed for bankruptcy protection and reached a deal to sell its automotive assets Tuesday, Oct. 16, 2012. (AP Photo/Boston Herald, David Goldman) In this Aug. 9, 2007, photo, development technician Ronnie Wilkins reaches for some development powder stored in a glove box used in lithium car batteries A123 Systems Inc. headquarters in Watertown, Mass. After years of struggling with weak sales and mounting losses, the electric-car battery maker filed for bankruptcy protection and reached a deal to sell its automotive assets Tuesday, Oct. 16, 2012. (AP Photo/Boston Herald, David Goldman)
  • In this Aug. 9, 2007, photo, a man walks from the A123 Systems Inc., in Watertown, Mass. After years of struggling with weak sales and mounting losses, the electric-car battery maker filed for bankruptcy protection and reached a deal to sell its automotive assets, Tuesday, Oct. 16, 2012. (AP Photo/Boston Herald, David Goldman)In this Aug. 9, 2007, photo, a man walks from the A123 Systems Inc., in Watertown, Mass. After years of struggling with weak sales and mounting losses, the electric-car battery maker filed for bankruptcy protection and reached a deal to sell its automotive assets, Tuesday, Oct. 16, 2012. (AP Photo/Boston Herald, David Goldman)
  • In this Feb. 23, 2007, file photo, President Bush, center, listens to Dave Vieau, President and CEO of A123 Systems, right, as he is shown a Toyota Prius plug-in hybrid car utilizing a lithium power battery during a demonstration of alternative fuel automobiles on the South Lawn of the White House.  Short of cash and hurting from slow sales of electric cars, battery maker A123 Systems Inc. sent its U.S. operations into bankruptcy protection on Tuesday, Oct. 16, 2012, and quickly sold its automotive assets. The filing is likely to stoke the debate in Washington over the Obama administrationís funding of alternative energy companies. In 2009, A123 got a $249 million Department of Energy grant to help it build U.S. factories. Republicans have accused Obama of wasting stimulus money on the companies after the failure of politically connected and now-bankrupt solar power company Solyndra LLC, which left taxpayers on the hook for $528 million. (AP Photo/Charles Dharapak, File)In this Feb. 23, 2007, file photo, President Bush, center, listens to Dave Vieau, President and CEO of A123 Systems, right, as he is shown a Toyota Prius plug-in hybrid car utilizing a lithium power battery during a demonstration of alternative fuel automobiles on the South Lawn of the White House. Short of cash and hurting from slow sales of electric cars, battery maker A123 Systems Inc. sent its U.S. operations into bankruptcy protection on Tuesday, Oct. 16, 2012, and quickly sold its automotive assets. The filing is likely to stoke the debate in Washington over the Obama administrationís funding of alternative energy companies. In 2009, A123 got a $249 million Department of Energy grant to help it build U.S. factories. Republicans have accused Obama of wasting stimulus money on the companies after the failure of politically connected and now-bankrupt solar power company Solyndra LLC, which left taxpayers on the hook for $528 million. (AP Photo/Charles Dharapak, File)
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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.

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