The Trail of the Battery Maker

BATTERYpack
BATTERYpack

A123 Systems was one of the cornerstones of the Obama administration’s push for energy self reliance. The company was rewarded with a US$241.1 million grant three years ago alongside a US$125 million Michigan state tax credit exemption. It was envisioned that the company would create jobs as well as wean the United States from foreign oil dependency and clean self sufficient energy.

Unfortunately, these lofty ideals were not achieved and now the company has been taken over by the Chinese company Wanxiang Group. The deal set included a US$450 million cash infusion in exchange for nearly eighty percent of the company. Now the controlling shares are seeking to obtain the technology and move the operations overseas, leaving the money and the grant lost and unrecoverable.

According to Jarett Skorup of the Makinac Center for Public Policy, “They were wrong. The problem is that policymakers decided to be in the business of picking economic winners and losers and unfortunately they’ve picked the losers far too often.” As for the money, he added, “It’s money that we’ll never get back. It was grant money so that there were not a lot of strings attached to it.”

In estimates conducted, the Waltham, Mass. Based battery maker had already lost a reported US$857 million in capital, laid off many of its workers and has recalled many of its products. Its stock price dropped like a stone, from a high of US$4.44 last year to its current level of US$0.26 per share this week. The decline of the company has been attributed to a number of factors and foremost amongst them is the lack of demand for their batteries as a result of the slow growth of the electric car market.

Skorup further adds, “It failed because there’s not enough demand and also because there are companies outside of the U.S. – some in China – where they’re able to produce the equipment for cheaper. Representatives should not be in the business of trying to determine what the next new thing is in terms of technology. The free market does it better.”

Amongst the clients of A123 Systems is Fisker Automotive and other companies. The company had grand plans, building a factory in Michigan soon to be followed by thirty others that would become fully operational in the next six years. The plants would manufacture electric vehicle batteries and other components for use in the burgeoning electric car market.

Nowadays though, employees at the Compact Power manufacturing plant in Holland, Michigan has been placed on rotating shifts, with many working just three weeks per month because of the lack of demand for the lithium ion battery cells. This plant was built at a cost of US$150 million in taxpayer money. The factory still has not produced a single battery pack for the Chevy Volt and for the Ford Focus Electric. Thus is the trail of the money for the battery maker lost along the way.