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Battery firm’s bankruptcy threatens high-end carmaker
Question of the Day
The recent bankruptcy of battery maker A123 Systems after it won a nearly quarter-billion-dollar federal grant threatens the business prospects of another well-known government-backed company: luxury car manufacturer Fisker Automotive.
While Fisker officials did not return email messages Wednesday, company attorneys laid bare the extent of the firm’s ties in a recent filing in U.S. Bankruptcy Court in Delaware.
A123 reported more than one-fourth of its revenue from Fisker in 2011, but the battery maker wants a judge to break its Fisker contract as well as other contracts, saying the deals are below market and unduly burdensome.
The problem for Fisker is that the car manufacturer has no short-term suppliers for the batteries that help power a high-end sports sedan it makes called the Karma.
“Consequently, the rejection of the Fisker contract represents an immediate threat of significant disruption and harm to Fisker’s business, with a corresponding negative impact on Fisker’s lenders, suppliers, customers and investors,” attorneys wrote in a filing.
Those investors include, of course, U.S. taxpayers. The Energy Department has, through loans or grants, been generous to both companies.
Despite winning a nearly quarter-billion-dollar grant, Massachusetts-based A123 filed for bankruptcy in October, setting off a reported bidding war for the company between Chinese-based Wanxiang Group Corp. and Johnson Controls Inc.
Attorneys for A123 said the Fisker contract, among others, should be rejected because many of the arrangements were “below market” and the company has been performing at a net loss under many of the contracts.
The company also said while it had plans to sell its automotive business to Johnson Controls, the Fisker contract and others would not be attractive to potential buyers.
The Washington Times reported this week that while A123 Systems drew down about $129 million from its nearly quarter-billion-dollar grant, a federal database showed barely 400 jobs were created.
Energy Department officials defended the expenditure, saying not all jobs created were reported.
Fisker was awarded an Energy Department loan worth more than $500 million, though it drew down less than half of that money before the loan was frozen because of missed milestones. Part of the loan money was supposed to be used to start production at a facility in Delaware.
Fisker has found itself facing scrutiny in Washington and on the campaign trail.
The House members questioned whether private investors would reap lucrative tax benefits if Fisker went bankrupt.
Fisker also has found itself in the cross hairs of Mitt Romney during the presidential campaign. He called the company a “loser” during his first debate with President Obama.
“You put $90 billion, like 50 years’ worth of breaks, into solar and wind, to Solyndra and Fisker and Tesla and Ener1,” Mr. Romney said.
A company spokesman later told Wired magazine that Fisker didn’t consider itself a loser, seeing as it has sold 1,500 cars, raised $1.2 billion in private equity and is expanding export markets overseas.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
About the Author
Jim McElhatton is an investigative reporter for The Washington Times. He can be reached at firstname.lastname@example.org.
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