(See Updates re President Obama's statement in 2010 and money the State of Michigan flushed down the drain.)
Eric Savitz at Forbes relays news this morning that "A123 Systems has filed for bankruptcy protection in federal court ... Late yesterday, the battery company had warned that it was about to default on several loan issues, noting that a bankruptcy filing was a possibility; but it still seems startling to see them file just hours later."
What does (or did) A123 do? It "makes rechargeable lithium-ion batteries for electric cars." Savitz can't resist casting the bankruptcy in political terms in his third paragraph:
Don’t be surprised to see this turn into a Solyndra-style political football; A123 had received $249 million in grants from the U.S. Department of Energy.Story Continues Below Ad ↓
That's grants, not loans (though loans which aren't getting paid back might as well be grants).
To Savitz, it's really not that important that we've seen another quarter-billion taxpayer dollars go "poof!" It's that it's a another "political football." Zheesh.
Yesterday, Bloomberg reported that "A123 announced in August that it was working on a deal with Wanxiang Group Corp., China’s largest auto-parts maker, for financing in exchange for a majority ownership stake." Now it would seem (I am told by a friend that Fox News has alluded to this possibility) that Wanxiang can scoop up the assets and technology at fire-sale prices.
The company is based in Waltham, Massachusetts, which, given the Bay State's track record, makes me wonder how much money state and local governments dumped into the failed enterprise.
UPDATE: From Bloomberg's report today:
President Barack Obama called A123 Chief Executive Officer David Vieau and then-Michigan Governor Jennifer Granholm during a September 2010 event celebrating the opening of the plant in Livonia, Michigan, that the company received the U.S. grant to help build.
“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,” Obama said in the phone call, according to a transcript provided by the White House. “When folks lift up their hoods on the cars of the future, I want them to see engines and batteries that are stamped: Made in America.”
UPDATE 2: The company may be headquartered in Massachusetts, but it's the State of Michigan which, in addition to Uncle Sam, dumped money into the company:
The company was promoted heavily by President Barack Obama and Michigan politicians and received hundreds of millions of dollars through federal “stimulus” and Michigan Economic Development Corp. programs.
... In sum: The president of the United States, Michigan’s former governor, the state’s two U.S. senators and the U.S. Secretary of Energy promised thousands of jobs from a company that in a mere two years went bankrupt. Despite a bankruptcy or buyout predicted by outside observers, the company continued to reward its top executives while laying off most of its workforce.
Taxpayers should not be surprised: This is only the latest example where political calculations trumped market ones. Only government bureaucrats spending other people’s money would think this was a good investment.
Cross-posted at BizzyBlog.com.