A Twisted Clean-Tech Tale: How A123 Wound Up In Bankruptcy 164
curtwoodward writes "Advanced battery maker A123 Systems was supposed to be one of the marquee names of the U.S. cleantech manufacturing scene — it won hundreds of millions in federal grants, had operations around the globe, and supplied the luxury Fisker electric car. In 2009, as the economy sputtered, A123 registered the country's biggest IPO. Today, it's in bankruptcy court, with possible buyers submitting bids for its parts and pieces. How'd A123 fall so far, so fast? As losses mounted, its reliance on just two big customers came back to haunt the company — and a series of screwups at a Michigan plant delivered the final blow."
Re:Michigan (Score:4, Informative)
Oh perhaps the deal didnt go through just yet See here [detroitnews.com]
Re:Just another cautionary tale (Score:3, Informative)
Government sticking its thumb on the scales of the economy is always a bad idea--whether it be bailing out banks or perpetual ethanol subsidies + ethanol mandates + import tariffs.
Re:Fisker Karma fires? (Score:5, Informative)
Yes. Any similar batteries are just as likely to catch fire if flooded with salt water, however.
Re:Just another cautionary tale (Score:5, Informative)
For perspective, the tax breaks given to oil companies amounts to about $2.4 billion/year (in the form tax breaks which are similar to the same tax breaks that every other industry gets for investing in expansion). Loan guarantees like the one A123 got totalled $90 billion in the "stimulus" bill passed in 2009.
Where's this $90 billion number from? $88 billion over ten years was the total for titles II, IV, V, and VIII of the ARRA bill. Loan guarantees are only part of this. [economist.com]
Wikipedia puts the total green-energy loan guarantees at $6 billion. [wikipedia.org] There might be some other loan guarantees hiding in other categories, but your total is suspect, and comparing an annual number to a ten-year number is deceptive regardless.
Re:Just another cautionary tale (Score:4, Informative)
If you need evidence of wealth transfer to plutocrats, simply Google "ratio of ceo pay to worker pay" to find some. The second hit is to The Economist ("Are They Worth It?"), which shows the change in ratio from about 20 in the '70s to well over 200 today, and the fourth to WSJ discussing a Dodd-Frank provision that could cap that ratio. That WSJ piece refers to a recent study showing productivity drops as that ratio increases.
Re:Just another cautionary tale (Score:5, Informative)
Loan guarantees like the one A123 got totalled $90 billion in the "stimulus" bill passed in 2009.
Not quite. A123's loan guarantee (totaling only $17 million, with an "m") came from the Department Of Energy, not directly through the stimulus bill. The DoE has extended about $34 billion in loan guarantees (of which only a small amount is actually expected to be paid out). A thorough analysis of the program is quite an interesting read [nearwalden.com].
The best source [economist.com] I can find for the quoted $90 billion is the total cost ($88 billion) for "purchases of goods and services" which included a number of other programs as well as funding the DoE loan guarantees. Note that the entirety of A123's loan, had the guarantee been paid, is about 1% of the rounding error.
Government sticking its thumb on the scales of the economy is always a bad idea--whether it be bailing out banks or perpetual ethanol subsidies + ethanol mandates + import tariffs.
That's the whole point of government, though. As I've said before, humans suck. We're terribly biased and selfish. Left to our own devices, we'll kill each other over trivial matters, because we really don't care about anything beyond our local community. That's just how our brains have evolved. Sure, philosophically we can consider the notion of loving everybody and being nice, but that's not our instinct. We have to work for it.
That's where government comes in. Government is an abstraction that gives us an excuse to make policies based in philosophy, rather than just what we want at the time. If a politician thinks a big farming industry is really good in the long run, they'll support a subsidy, even if that means higher taxes right now. Since the policies are just abstract ideas to the politicians, rather than actual food disappearing from their dinner table, the politicians' human brains can make a less-biased decision based on the information they're given.
Of course, now it's that information that can be tainted by need and greed. Each politician thinks they're doing what's best, and voting for what will most help their constituents. This is why it's important to communicate with your representatives about issues you're knowledgeable about, and double-check your facts. Of course, since all humans are biased to believe that their opinions are objectively right, the burden's on you to provide enough proof to make a convincing argument.
Re:Just another cautionary tale (Score:5, Informative)
Wow. You are missing the whole concept of Risk and Return on Investment.
Simple example is a SBA loan for a small company to buy a building for their operations (or other capital investment). The bank would normally require 30% down payment to mitigate risks; the SBA loan basically provides a 40% guarantee so the business only needs to put down 10%. The SBA provides that guarantee to help small businesses grow in ways that would otherwise be impractical at best. In return, the small business (hopefully) can grow, hiring people and stimulating the economy. Risk for the SBA loan is first taken by the business, then the government, and then the lender. SBA loans have interest rates about 0.75% above what a well qualified homeowner could get, rather than the 7-10% that might otherwise be required.
The bank is going to need that 7-10% interest to absorb the risk of a 90% loan, which simply takes money away from the small business and their growth opportunities.