Battery manufacturer A123 Systems, which got nearly $250 million in grant money under President Barack Obama’s 2009 stimulus program, filed for Chapter 11 bankruptcy protection Tuesday morning – just in time for Republican Mitt Romney to add the firm to his indictment of Obama’s green-energy program. In the first debate with Obama, Romney used the collapse of solar firm Solyndra to attack Obama’s energy agenda.
Herwig Prammer / Reuters
Energy Secretary Steven Chu
“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,” said Romney spokeswoman Andrea Saul on Tuesday.
But A123, based in Watertown, Mass., but with manufacturing plants in Michigan, got funding under the administrations of both Obama and President George W. Bush. The firm got a crucial influx of early money from the Bush administration in 2001 and 2003. In fact, the firm might not have been alive in 2009 to get its Obama stimulus funding if it hadn’t been for earlier subsidies under the Bush administration.
In a speech at a business conference on Sept. 4, 2008, then-Energy Secretary Samuel Bodman noted that in 2003 his department had made an award under the Small Business Innovation Research (SBIR) program to A123 Systems for work on lithium-ion batteries.
“While this company now has major private investors, on many occasions the company's founders have described this SBIR grant as their first source of outside funding,” Bodman said. “And the results, now just five years later, are remarkable. This company now employs over 1,100 people who produce batteries with an unprecedented combination of power, safety and long life…”
He added, “I've had the pleasure of visiting A123 Systems, located right outside of Boston, and I can tell you firsthand that this company is doing terrific work.”
According to Jan. 21, 2010, testimony by current Energy Secretary Steven Chu before the Senate Energy and Natural Resources Committee, A123 Systems received SBIR grants in 2001 and 2003 totaling $850,000 to refine its lithium-ion battery technology.
Bush also laid the foundation for Obama administration subsidies to alternative-energy firms when he signed into law the Energy Independence and Security Act of 2007. (GOP vice presidential candidate Rep. Paul Ryan voted against the bill, partly due to an earmark in the measure that he said would benefit one forestry company.)
The 2007 law created, but did not fund, the Advanced Technology Vehicles Manufacturing (ATVM) program. In the summer of 2008 as the automobile industry was beginning to fall on hard times, Midwestern lawmakers proposed $3.75 billion to activate the ATVM and make loans to U.S. vehicle and battery firms.
When Obama became president, one of his highest priorities was to spur manufacturing of alternative-energy technologies and vehicles. The Energy Department used ATVM grants as a way to subsidize green-energy firms. On Aug. 5, 2009, Vice President Joe Biden announced $1.35 billion in DOE grants to spur advanced battery and electric vehicle manufacturing. A123 Systems got $249 million of that money.
“Terrific news," said Sen. John Kerry, D-Mass. "A123 Systems is doing the kind of cutting-edge work we need to get our manufacturing industry back on track and create jobs here at home… These grants are a wise investment that will pay many dividends."
That summer of 2009 was a buoyant time for the firm, which launched its initial public offering in September, raising $390 million. “The IPO entered venture capital lore, a beacon for clean-tech entrepreneurs everywhere,” reported Climate Wire. The stock surged from its IPO price of $13.50 a share to more than $28 before 2009 ended.
The firm also got another Energy Department grant of $5 million to determine whether its batteries could store emergency power for the electric grid.
In January 2010, A123 was one of the firms benefiting from another stimulus cash influx – as the Labor Department announced the state of Michigan would get $5 million in grant money to train workers in green-energy skills.
In September 2010, Obama called Michigan Gov. Jennifer Granholm to congratulate her and A123 Systems for opening the largest lithium-ion battery manufacturing plant in the United States in Livonia, Mich.
"It is incredibly exciting to see how far you guys have come,” Obama said, in remarks reported by the Detroit News. “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.”
But there were skeptics.
By early 2011 one stock analyst, Theodore O’Neill, now at Litchfield Hills Research, told Climate Wire that A123 was heading for “a giant train wreck” in the next few years. He said the tiny numbers of U.S. battery-powered vehicles would not create enough demand for A123 to make a profit.
By this summer GOP lawmakers were raising the alarm about a Chinese firm taking majority ownership of A123 Systems. “We need to be sure that when the federal government invests close to a quarter of a billion dollars in grants to a company, that the technology developed as a result of this taxpayer support doesn’t end up in China,” said Sen. Chuck Grassley, R-Iowa.
But that Chinese investment didn’t happen, and on Tuesday A123 filed for bankruptcy. A larger firm, Johnson Controls, will buy its factories in Michigan.
In an interview Tuesday, O’Neill said, “The Fisker Karma was the only car taking the A123 batteries. And I started calling around to dealers and as late as November of 2011 the dealers still didn’t have cars to sell. So you had A123 going ahead and building a 600,000-square-foot manufacturing facility for which there’s no end market. It’s not clear to me how much the Department of Energy is to blame for having A123 expand as rapidly as they did in advance of actual demand or whether it was all (A123’s chief executive) David Vieau” who erred in his forecast. “It’s probably a little bit of both,” he said.