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Quarter-billion-dollar stimulus grant creates just 400 jobs

Bankrupt energy business joins list of federally-backed flops

- The Washington Times - Monday, October 29, 2012

Battery maker A123 Systems vowed thousands of new jobs when it received a nearly quarter-billion-dollar stimulus grant in late 2009, but federal job-tracking figures show only a few hundred positions were created before the company joined a growing list of federally backed energy businesses that ended in bankruptcy.

The latest quarterly report on file with a federal stimulus tracking database shows just seven positions created through the grant from April to June this year. Previous quarters' job reports contained anywhere from a handful of positions created to more than 100 new jobs.

But even when the quarterly reports are combined, a total of 408 new positions were reported under the stimulus program since 2009, amounting to more than $300,000 spent for each new job reported.

"A123 has been struggling for some time. Was the company struggling when the Energy Department decided to award it a federal grant? Did the Energy Department perform enough due diligence before making this award?" Republican Sens. Chuck Grassley of Iowa and John Thune of South Dakota said when they recently pressed Energy Department officials to explain the selection process.

The company's bankruptcy has spawned renewed scrutiny on the Energy Department after it backed several other businesses now involved in high-profile bankruptcies, including Solyndra LLC, the California-based solar panel manufacturer that went broke after burning through a half-billion dollars in federal money.

Energy Department officials say the job creation numbers are misleading, noting that the jobs verified by The Washington Times through the government database don't include many other positions that were created but not reported on the federal Recovery.gov tracking website.

"Recovery.gov reflects a small portion of the total employees working on our projects — serving as a quarterly snapshot of only those workers paid directly with Energy Department funds," department spokeswoman Jen Stutsman wrote in an email.

"A123's manufacturing facilities are employing hundreds of workers on site in Michigan — plus workers up and down the supply chain — building advanced batteries here in the U.S."

The Massachusetts-based battery maker received a $249 million grant in December 2009 through President Obama's stimulus program, of which the company received about $129 million before it went bankrupt this month. Like all other recipients of stimulus loans or grants, A123 Systems was required to report job creation statistics to Recovery.gov.

Officials also say the grant was used for manufacturing equipment, so the jobs reported included workers responsible for installing the factory equipment, but not those who would later use that equipment during the assembly process.

The company declined to discuss how it reported jobs through the stimulus program.

The last quarterly report on file, from March to June 2012, lists seven jobs created, but it also hinted at other challenges, with the company acknowledging "operational challenges and quality assurance issues."

In a quarterly report released months earlier, the company cited a weakening market and other factors for "negatively impacted" production levels.

The language contained in the stimulus reports stands in sharp contrast to the optimistic talk of company officials less than two years earlier.

"Over the next several years, we expect to create thousands of jobs in Greater Detroit and plan to continue our expansion in the area as we do our part in helping the U.S. emerge as a global leader in the production of advanced lithium ion batteries," company President David Vieau said after the company opened a factory in Livonia, Mich., in the fall of 2010.

The company's seemingly bright prospects also got the attention of the White House.

"There's A123, a clean-energy manufacturer in Michigan that just hired its 1,000th worker as demand has soared for its vehicle components," the president said in July 2011.

Earlier this month, Mr. Grassley and Mr. Thune pressed Energy Department officials to explain whether the department performed "due diligence" before awarding the company so much money.

"The bankruptcy raises the prospect that taxpayers will get little or no return on their investment in A123 and will lose millions of dollars," they wrote, adding that the "administration needs to answer for this. The taxpayers shouldn't have to subsidize poor investments in failed energy companies."

Mr. Thune called the A123 stimulus package "another example of President Obama gambling with taxpayer dollars and picking winners and losers in the green energy world."

"There were clear warning signs that A123 was having financial problems even as the administration continued pouring millions of taxpayer dollars into this failing company," he said.

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