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.

The Value of Hybrids in Change

Hybrid Cars
Hybrid Cars

According to the latest numbers, less than one percent of total cars on U.S. roads are fully electric. This though was not always the case, as back in 1900, 34 percent of cars in Boston, Chicago and New York were electrically powered, while half of the total vehicles on the road then were powered by steam.

The misconception is that a powerful force would suppress one technology in favor of another one, the former crushed by the wheels of progress. Scientific and business historians though, have different take on the matter. These experts identified that the culture as well as the technologies that constantly shape and be shaped by it. This is a messy process that would determine eventual winners and abject losers.

There are many reasons why Americans should have adopted electric cars a long time ago. The early versions of electric vehicles were easier to operate compared to their gasoline powered cousins, with a cleaner and better smelling by product. While the battery range and speed was limited, a greater majority of the travel done using cars are just short trips well within the range of these vehicles.

According to David Kirsch, Associate Professor of Management at the University of Maryland and author of “The Electric Vehicle and the Burden of History”, “We drive gas powered cars today for a complex set of reasons but not because the internal combustion engine is inherently better than the electric motor and battery.”

The Electric Vehicle Company was the largest carmaker in the United States at the turn of the 20th century and at the same time, the biggest car owner in the country. The system then was that EVC rented or leased its vehicles instead of selling them, allowing an individual to take the car for short trips but not assume ownership. This is due to the company mindset that the individual did not have the technical wherewithal to maintain the vehicles. Unfortunately, a series of business deals left the company bankrupt and with it, the future of the electric vehicle.

Because of this, investors turned their back on electric vehicles, leading to hiatus in the development of this technology in the following years. On the other hand, gasoline powered companies improved their technology and lowered their overall purchase cost. Thus, in the next twenty years instilled in the American psyche what a car was and it has been hard to wean them from this mindset.

Kirsch added, “Part of what makes infrastructure is its invisibility. When we have to create infrastructure for ourselves — installing charging stations at our houses, for instance — we make the invisible visible. It becomes an overwhelming task, like having to remake the world. Most people just want a car.”

For his part, Kirsch thinks hybrids would help society change from its old ways. For many, hybrids do not need separate infrastructure nor is there a need to change driving habits overall as well as learn complicated maintenance procedures. The familiarity of the current mindset as well as the rich history would help push hybrids to the top of the market in the near future.

Diesel Car Owners Decry Bias

some cars at zero pollution
some cars at zero pollution

A Washington based advocacy group named the U.S. Coalition for Advanced Diesel Cars have recently released a white paper to forward its car engine design as part of the technologies that are also fuel-efficient.

The paper’s author is Norman Y. Mineta, the former transportation secretary of then President George W. Bush until 2006, claims that the incentives and other policies given by federal and state governments are biased for electric vehicles to the exclusion of all others. The group said that these incentives should be given to all technologies equally to allow a level playing field for all.

Mr. Mineta wrote, “The desire to dictate solutions based on preferred technologies rather than set goals and develop standards is a bad practice that denies creative innovations.”

The paper details that the incentives for electric vehicle purchases were steering consumer and manufacturer decisions regardless of market forces. They further criticized the recent fleet purchases of government wherein the vehicles were nearly exclusively hybrids or electric vehicles. They claim that some gasoline and diesel engines could nearly be as energy efficient as any other technology.

This claim of energy efficiency by the group is supported with a Massachusetts Institute of Technology study last April 2008 that compared the energy efficiency and emissions of diesel and gasoline engines compared to the next generation all electric and hybrid vehicles. The study showed that these internal combustion engines came within 10 to 15 percent of these categories with the new technologies.

The report though did not provide factors that were used in the study to determine the type or amount of energy consumed during the charging of the electric vehicles or emissions generated by the utilities that provided electricity for these vehicles. It was found that emissions during production of electricity and resources utilized could vary, as utilities in many states are required to add sustainable energy sources to their production line. Thus, the data used for today would not be the same sources used for the future. Furthermore, battery technology has improved by leaps and bounds since the MIT study was undertaken.

The paper further asserted that efficiency improving technologies such as direct injection, variable valve timing, turbo charging and friction reducing parts together with transmissions with greater gear ratios have not been fully utilized in the United States. It is asserted in the paper that the use and adoption of these technologies, together with downsizing of both engines and vehicles would be the best way to achieve energy efficiency goals, such as those stipulated in the revised Corporate Average Fuel Economy standards proposed by the Obama administration last July.

The group claims that a turbocharged diesel engine with an exhaust after-treatment system required for emission compliance would be able to outperform a gasoline engine by as much as 30 percent in fuel economy and 25 percent of greenhouse gas emissions. These improvements would entail a cost savings of $1,500 to $2,500 for a diesel engine vehicle.

Diesel engines are still being utilized in countries with low noxious gas emissions standards. Some companies though have been able to market their clean diesel engines in the United States, though at a premium price. These carmakers are Mercedes-Benz and Volkswagen and these companies have opposed the 2017-25 CAFÉ Standard issued by the Obama government.

According to Mr., Mineta, “The conclusion is rather simple. We need to reestablish both the principle and practice of technology neutrality, thus rendering the very best solutions in the years to come.”