NCPA - National Center for Policy Analysis

Maker of Batteries Files for Bankruptcy

October 23, 2012

The troubled battery maker A123 Systems filed for bankruptcy, dealing a blow to the Obama administration's program to jumpstart a domestic battery industry and spur development of electric vehicles, says the New York Times.

  • A123 received money under the stimulus program for electric car development.
  • In addition, it was awarded a grant from the Department of Energy for $249 million.
  • However, it had only received $132 million of that before its bankruptcy.

Before its bankruptcy, A123 struck a deal to sell a majority stake to Chinese auto parts manufacturer Wangxiang. However, the deal was never completed and the company failed to make a debt payment on the $75 million it had borrowed from the Chinese company.

A123 opened two factories in Michigan and supplied batteries to the likes of General Motors and a start-up firm, Fisker automotive. However, the company had to recall defective batteries in Fisker cars.  In response to insufficient revenue, the company agreed to sell up to 80 percent of the company to the Wangxiang Group.

This move invited many criticisms against the company. For instance, Chinese companies got access to American technology that American taxpayers funded. Now, the Energy Department is countering that the employees and customers would be absorbed by another competitor in the electric battery market: Johnson Controls.

  • Johnson Controls is poised to be the dominant American battery manufacturer and has agreed to provide $72.5 million in financing for A123's reorganization in bankruptcy.
  • Most importantly, Johnson Controls will have access to the important assets left behind by A123 such as electric-grid technology.

This is sure to provide the Romney campaign fodder as it criticizes Obama's energy policy as being misguided. As energy continues to be a large issue in the presidential campaign, it is difficult for the Obama administration to explain this failure considering the similar fate other energy companies like Solyndra.

Source: Bill Vlasic and Matthew L. Wald, "Maker of Batteries Files for Bankruptcy," New York Times, October 16, 2012.


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