Republican presidential candidate Mitt Romney called the bankruptcy filing by battery maker A123 Systems Inc., which received a $249.1 million U.S. grant, an example of President Barack Obama’s failed green-energy policy.
Romney, in the first debate with Obama two weeks ago, called four companies “losers” in discussing choices of U.S. green-energy aid recipients. A123 wasn’t one of them.
The electric-car battery producer’s bankruptcy filing today, hours before the second debate was to take place, gave Republicans fresh ammunition to criticize Obama’s record on the economy.
“President Obama has been very strategic and aggressive in pointing to the auto bailout as an example of what the government did right,” Julian Zelizer, a history and political affairs professor at Princeton University, said in an interview. “This is the reverse. Romney will bring this out as an example not of corruption as in Solyndra but as an example of failed investment.”
A123, based in Waltham, Massachusetts, received the U.S. Energy Department grant from Obama’s economic stimulus package in 2009 to build a factory in Michigan.
Romney, who has called the Energy Department’s green-energy programs “crony capitalism,” singled out Fisker Automotive Inc., Tesla Motors Inc., Solyndra LLC and Ener1 Inc. during the Oct. 3 debate as “losers” Obama had picked. Solar-panel maker Solyndra filed for bankruptcy last year, and Ener1, parent of a battery company that received a $118 million Energy Department grant, sought bankruptcy protection in January.
“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,” Andrea Saul, a Romney campaign spokeswoman, said in an e-mailed statement.
Under Obama, the government has invested about $5 billion in the U.S. electric car industry through loans to auto companies including Fisker and Tesla, grants to companies such as A123, and tax credits of as much as $7,500 for customers who buy plug-in cars. Some of the current administration’s investment is a continuation of programs begun during Republican George W. Bush’s presidency, before Obama took office in January 2009.
A123 supplied lithium-ion batteries for Fisker’s $103,000 luxury plug-in Karma, which was panned by Consumer Reports after it stopped running in the middle of a test drive. That led to a recall by Fisker, which has also been backed by the Obama administration, that cost A123 $55 million and helped put it on the financial brink.
“A123’s promising technology has a long history of bipartisan support,” Dan Leistikow, an Energy Department spokesman, wrote today in a blog post on the agency’s website. “In 2007, the company received a $6 million dollar grant as part of the Bush administration’s efforts to promote advanced battery manufacturing, and the company has used $132 million of a 2009 grant from the Department of Energy.”
Jen Stutsman, an Energy Department spokeswoman, declined to comment beyond the blog post.
A123 officials have contributed to Democratic political candidates including Obama, according to the Center for Responsive Politics, a Washington group that tracks campaign finance.
Chief Executive Officer David Vieau gave $2,300 to Obama’s campaign less than a month before the 2008 election, and has contributed to other Democratic candidates and groups, including Senator John Kerry and Representative Edward Markey, both from Massachusetts, and Louisiana Senator Mary Landrieu, according to data from the center.
Gururaj “Desh” Deshpande, an A123 board member, was one of 26 people appointed in 2010 to a White House advisory board on technology innovation and entrepreneurship. Others appointed included Steve Case, a co-founder of AOL Inc., and Jerry Yang, a co-founder of Yahoo Inc. In that role, Deshpande attended a ceremony in April at which Obama signed his jobs bill into law.
Representative Darrell Issa, the Republican chairman of the House Oversight and Government Reform Committee, today called A123 “the latest cautionary tale against the administration using taxpayer dollars to sponsor pet projects and then running from responsibility when they’re not successful.”
Republican U.S. Senators Charles Grassley, an Iowa Republican who is his party’s ranking member on the Senate Judiciary Committee, and John Thune, a South Dakota Republican, last week questioned A123’s plan, announced in August, to give Wanxiang Group Corp., China’s largest auto-parts maker, a majority stake in exchange for financing.
A123 is abandoning the Wanxiang plan and agreed to sell its automotive business to Johnson Controls Inc. for $125 million, Vieau said in a statement today.
The bankruptcy raises questions about whether A123 should have received the grant, Grassley and Thune said in a statement today.
“The bankruptcy raises the prospect that the taxpayers will get little or no return on their investment in A123 and will lose millions of dollars,” they said.
The sale to Johnson Controls, while better than the proposed transaction with Wanxiang, is “small comfort, given the hundreds of millions of dollars wasted on this firm,” Grassley and Thune said.
Environmental groups said A123’s bankruptcy doesn’t mean the advanced-battery industry, or Obama’s support of it, is a failure.
“The fact that the advanced-battery sector is growing 25 percent a year doesn’t mean that every company will be a winner,” said Mindy Lubber, president of Ceres, a Boston-based non-profit group that works to make business more sustainable.
The A123 plant in Michigan was trumpeted by the company when it opened in September 2010 as the largest lithium-ion automotive battery plant in North America. Then-Governor Jennifer Granholm, a Democrat, lobbied the Obama administration for the battery-maker grants and hailed the plant as the next wave of Michigan’s economic recovery.
Michigan’s unemployment rate was 12.2 percent at the time the plant opened.
Consolidation in advanced-energy industries is to be expected, Granholm said in a statement today. She quoted Energy Department statements that its investments will cut the cost of a 100-mile-range electric-car battery to $10,000 by 2015, from $33,000.
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