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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."
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A Twisted Clean-Tech Tale: How A123 Wound Up In Bankruptcy

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  • This plant is right down the street from me. It will be sad to see it go out with such a whimper. Also didn't JCI buy a portion of their business??

    • Re:Michigan (Score:4, Informative)

      by willie3204 ( 444890 ) on Thursday December 06, 2012 @01:16PM (#42205321)

      Oh perhaps the deal didnt go through just yet See here [detroitnews.com]

      • Yeah, they're actually in the "auction" part of the bankruptcy today. JCI is the opening bidder - the "stalking horse" as it's colorfully named. Unsure when the other bids etc will be made public, but there is a hearing scheduled in court on Dec. 11.
  • by Revotron ( 1115029 ) on Thursday December 06, 2012 @01:17PM (#42205339)
    Nothing good has ever come from the commander-in-chief tossing government money back to his buddies (and campaign donors) in industry. My statement applies to this president just as much as it does to those before him.
    • by mspohr ( 589790 ) on Thursday December 06, 2012 @01:23PM (#42205415)

      The government has been tossing taxpayer money to the oil industry, big agriculture, banks and everyone else who could buy themselves a politician or two since the beginning of time.
      This particular failure sounds like a combination of bad management plus the fact that developing and scaling new technology is hard.

      • Re: (Score:3, Informative)

        by LehiNephi ( 695428 )
        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.

        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.
        • by mspohr ( 589790 ) on Thursday December 06, 2012 @01:58PM (#42205769)

          Just a few clarifications to your post.
          Loan guarantees are not grants.
          A123 received a $250 million loan guarantee, not $90 billion.
          Government has a vital role to play in keeping the economy moving. This is done through tax incentives, loans, stimulus programs and grants.
          The problem is that the wrong corporations capture these incentives. Obsolete industries and industries which are doing fine without incentives tend to capture most of them... (i.e. General Electric receives enough government incentives that they pay no taxes but they are a perfectly viable business to stand on their own.)

          • by Endovior ( 2450520 ) on Thursday December 06, 2012 @02:08PM (#42205879)

            Loan guarantees like the one A123 got totalled $90 billion in the "stimulus" bill passed in 2009. 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.

            Just a few clarifications to your post. Loan guarantees are not grants. A123 received a $250 million loan guarantee, not $90 billion. Government has a vital role to play in keeping the economy moving. This is done through tax incentives, loans, stimulus programs and grants. The problem is that the wrong corporations capture these incentives. Obsolete industries and industries which are doing fine without incentives tend to capture most of them... (i.e. General Electric receives enough government incentives that they pay no taxes but they are a perfectly viable business to stand on their own.)

            Read post more carefully before refuting, parent was quoting the total amount of 'stimulus' loan guarantees in that year, not the money given to A123 specifically. Now, you could argue that it'd work fine if it weren't for the 'wrong' corporations getting the money, but really... are there 'right' corporations that could be getting money? Someone has to pay the taxes in the first place, after all... and since when has robbing Peter to pay Paul ever resulted in net gains?

            • You asked, I answer. Yes, there are right companies to get the money, and yes, robbing Peter to pay Paul often is quite valuable.

              For example, "we will collect taxes to pay to build a wall around our city", or "we will collect taxes to pay for a sewer", or "we will collect taxes to pay for lighthouses in remote areas that our ships pass near".

              In those cases, the result is: fewer homes being flattened by invaders, substantially less stench, and rather many fewer dead sailors and lost cargoes.

              In more modern t

          • Re: (Score:2, Insightful)

            by khallow ( 566160 )

            Loan guarantees are not grants.

            Well, the previous poster did call it a loan guarantee. As to whether or not it is a "grant", it's indistinguishable from a grant to the people that received money from that loan that would otherwise not happen and the bank that made that loan who would otherwise have to deal with the default instead of a fairly risk-free investment. All of this happened at considerable taxpayer expense.

            Government has a vital role to play in keeping the economy moving. This is done through tax incentives, loans, stimulus programs and grants. The problem is that the wrong corporations capture these incentives. Obsolete industries and industries which are doing fine without incentives tend to capture most of them... (i.e. General Electric receives enough government incentives that they pay no taxes but they are a perfectly viable business to stand on their own.)

            The government that has the money to keep the economy moving, has the money to flush down sinkholes and does. It's almost

            • From DOE's loan program page:

              Credit subsidy cost is a reserve established by the U.S. government to cover the risk of estimated shortfalls in loan repayments. It was established by the Federal Credit Reform Act of 1990 (“FCRA”) and represents the net present value of the estimated long-term cost to the U.S. government of the loan guarantee. Credit subsidy cost is primarily influenced by two key variables:

              Probability of default; and
              The

              • by khallow ( 566160 )
                If this program were really in effect, then the companies in question wouldn't have been able to afford a loan. What's painfully obvious here is that the government decided who the winners and losers would be and then understated the risk of default, either deliberately or through sheer incompetence.

                As to the guarantees for nuclear power, I have no trouble getting rid of them. Go for it.
          • EXCUSE ME? (Score:5, Insightful)

            by Anonymous Coward on Thursday December 06, 2012 @02:54PM (#42206391)

            Government has a vital role to play in keeping the economy moving. This is done through tax incentives, loans, stimulus programs and grants.

            Yeah, by ripping off people by creating an A123 Systems, Solyndra, you NAME it, they keep the economy going! You know, the guys who just chew up money, give it to their buddies, and run off having raped everyone with a corporate scam. And by keeping the economy going, I mean inflating and taxing the US economy into asphyxiation to where PEOPLE HAVE NO MONEY TO BUY because they are paying for this corporate welfare garbage. Except that they aren't because the debt is GROWING AT ABOUT FOUR BILLION DOLLARS PER DAY.

            FREE markets which are markets free from government meddling (this includes corporate welfare and tax breaks for the big businesses) allow the economy to work AS IT SHOULD. Consumer demand drives supply chains. Consumer demand is WHAT PEOPLE WANT. When people get what they want, you have a healthy economy.

            You can put financial regulations and environmental protections in place against businesses all day long, but as soon as you try to force the market to do something, it will adapt. For instance, there is an anti-tobacco subsidy where the government pays you to not plant tobacco. You plant one acre to prove that you can plant tobacco, and the government gives you FREE MONEY to not plant tobacco on the rest of the land. It doesn't take but five seconds of thought to understand how not only does this increase the growth of tobacco but drains the coffers at the same time. This is one of the simplest examples. You end up with your controls both fostering corruption (great way to pay yourself or your buddies) and creating inefficiencies in the economy which will be bypassed as there is still demand for whatever the government was trying to kill and which will be abused because there is an artificial free supply of government-issued "incentive."

            • Mod parent up! (Score:3, Insightful)

              by Anonymous Coward

              I think I get where you're going with the "environmental regulations" argument though that can somewhat be argued the same way. If there is a way around a regulation, you'd better be sure the market will find it!

              Look at it this way. We have a population of ~270 million "entities of self interest." They're all chipping away at whatever they can get a piece of. If the government is spending half the GDP on the weapons of war, well, where do you think all the jobs are going to be? Yeah. So everyone's getting a

              • To add to the loan/subsidy issue, I will bring up student debt.

                To elaborate, much of "social welfare" spending is just crony capitalism masquerading as help for individual consumers.

                The government makes loans available for education, which allows schools to drive up their costs, because you're not really paying for the education, you're paying for the networking opportunities with the other students, at institutions with inelastic supplies of slots for students.

                Similarly, all this medical spending can hardly be said to benefit consumers. We have an unfree market in hea

                • There's a very good reason why tuition skyrocketed over the past ~15 years -- the baby boomers' kids finally hit American colleges and universities like a tsunami, and they showed up expecting the small classes, individual attention, and comfortable surroundings their GenX cousins, aunts, and uncles got to have. See, after the last boomers graduated in the 70s, colleges and universities saw their enrollments PLUMMET. It wasn't quite as visible in states like Florida (that weren't very big during the 60s/70s

          • Re: (Score:2, Insightful)

            by Anonymous Coward

            Loan guarantees are not grants.

            When you hand them to companies in businesses that are too risky to actually obtain private financing, they might as well be grants.

            Government has a vital role to play in keeping the economy moving.

            That is an opinion. And an opinion that could quite possibly why we have the sort of problems we do. Big government breeds big business. Government bureaucracy and regulations are an added cost drag on the business of actually producing and selling products, and they force businesses into having to be larger in order to offset the massive overhead of accounting and regulator

          • The $250M was not a loan guarantee, it actually was a matching grant - for each dollar the company spent on certain qualifying expenses, the feds would match a dollar. A123 eventually drew about $130M of the nearly $250M that was authorized. Press release: http://ir.a123systems.com/releasedetail.cfm?ReleaseID=403090 [a123systems.com] The money was free in that sense, but came with strings - the factory that A123 built with help of that federal money means the U.S. government retains an interest and gets a say in what happens
            • No real strings attached if they go bankrupt. You think the people running the company don't know that?

              The .gov should stay out and let the markets decide who wins because then it costs the taxpayer nothing.

              • Well, there are a couple little strings - at least in the government's opinion! It filed paperwork letting the bankruptcy judge know that, because of the federal financing, the government will have a say of some sort in who gets to buy the facilities it underwrote. That's generally thought to be code for "we will have more to say if a Chinese firm submits the winning bid." More here: http://newsandinsight.thomsonreuters.com/Bankruptcy/News/2012/11_-_November/U_S__says_A123_sale_requires_its_consent/ [thomsonreuters.com]
              • by BVis ( 267028 )

                The .gov should stay out and let the markets decide who wins because then it costs the taxpayer nothing.

                That looks dynamite on paper, but not so great in practice. On paper, investing in renewable energy has the potential to have a profitable outcome, but practical application (or widespread adoption on the scale that would be required) is years away. If you're a rich guy, and you have the American attitude of considering instant gratification the only acceptable situation, why would you invest in somethi

          • by bill_mcgonigle ( 4333 ) * on Thursday December 06, 2012 @03:09PM (#42206609) Homepage Journal

            Government has a vital role to play in keeping the economy moving. This is done through tax incentives, loans, stimulus programs and grants.

            That's their claim, but it's hogwash. Every dollar 'given' as stimulus has been taken from other people, either directly through taxes, or by devaluation of capital through inflation.

            That capital is thus no longer available to its original (proper) owners, and so cannot be invested by them. The only remaining question is whether the government is more careful with how it invests other people's money than they are themselves.

            To illustrate the point, may I present: A123 Systems.

            • by Sique ( 173459 ) on Thursday December 06, 2012 @04:59PM (#42208325) Homepage

              Every dollar 'given' as stimulus has been taken from other people, either directly through taxes, or by devaluation of capital through inflation.
              That capital is thus no longer available to its original (proper) owners, and so cannot be invested by them. The only remaining question is whether the government is more careful with how it invests other people's money than they are themselves.

              Every dollar 'given' as a stimulus to keep up the law has been taken from other people, either directly through taxes, or by devaluation of capital through inflation. That capital is thus no longer available to its original (proper) owners, and so cannot be invested by them. The only remaining question is whether the government is more careful with how it protects other people than they are themselves.
              You see? With the same hogwash argument you could argue that we should abolish all police, judges and the army, and let people decide how they protect themselves. Some will invest in a private army of their own, other will just keep some bodyguards, other will bound together and form some corporation with group of leaders which then organise the protection of their members. We should also encourage competition by having at least two local providers of security where you can pay your protection money to.
              And suddenly we are inmidst of tribal warfare, with local warlords feuding each other for territory -- pardon: marketshare. Local businesses will bloom marketing services to the local private armies. Lets call those businesses thus "marketenders".
              But we had a big historical experiment: Which countries did thrive? Those whose libertarian society gave large tax breaks to the wealthy, even extempting the most wealthy from all taxes, gave the protection business into private hands as fiefdoms, and encouraged everyone to found their own territory, unregulated, with their own standards? And then let the war -- pardon, the market -- decide whose country -- pardon, business -- will survive and conquer -- pardon, buy -- the others? Or those, who had a strong government with an efficient administration, setting general laws everyone had to comply with, a good state education system open to everyone, a well organised army and police force and a system of judges and courts paid enough to decide fair and according to the law?

        • Re: (Score:3, Insightful)

          by jythie ( 914043 )
          Eh, it is an old debated topic. However, in general, a government doing some tipping is better then an economy left completely to its own devices. The general problem is, businesses do what is best for them and worst for everyone else.. when everyone is doing this things end up in pretty bad shape. You need a counter force in there that can look at the big picture and do what is best for the economy as a whole. I will not pretend governments are fantastic at it, but a sub par job still results in more
          • Not at all better (Score:4, Insightful)

            by SuperKendall ( 25149 ) on Thursday December 06, 2012 @02:37PM (#42206201)

            in general, a government doing some tipping is better then an economy left completely to its own devices

            Totally false.

            A123 being propped up by the government meant that other companies developing battery technology were less likely to work on similar problems because they had to get real money, which would have been also less easy to come by with A123 funded in that space.

            Private investors are way more careful to invest in things that might work. They are obviously smarter at this because they are using real money, with real consequences for loss. Neither is true of government funds. The government stinks on ice at picking out winners in the market and in the end most of the money they give out is essentially a laundering operation to campaign donors.

            • Re: (Score:3, Insightful)

              by Anonymous Coward

              You completely neglect the market forces at work in the 1800's before the trust busting days of the US government. The only force powerful enough to dislodge the rabidly growing trusts was the US government - and then it was only a matter of time. Free markets break down when there are monopolies, monopolies form and grow if allowed to, and monopolies eventually become inherently destructive. If it wasn't for the government, there wouldn't have been a Microsoft monopoly, because US Steel or Standard Oil

              • by khallow ( 566160 )

                You completely neglect the market forces at work in the 1800's before the trust busting days of the US government.

                And the markets. Those trusts were bleeding market share. It probably wouldn't have been fast enough for you since the process was happening over decades.

                But let's suppose you are right. That still doesn't justify the vast majority of what the US does. A need to prevent monopolies doesn't lead to the government regulating so much of US society or shoveling so much money around.

            • Re:Not at all better (Score:4, Interesting)

              by jythie ( 914043 ) on Thursday December 06, 2012 @04:40PM (#42207989)
              *smirk* you actually think private investors are more careful? Or that they are generally working with their own money? Wow.....

              The government is generally not trying to pick individual winners or losers, it is trying to steer an economy, the two are not the same thing. As for A123 being 'propped up'.. in case you have not noticed, the battery market has almost completely left the US at this point. Countries that have solid government investment in research and incubators have pretty much taken that market. Private firms in the US currently do not stand a chance, esp since the private equity market generally will not take risks on them because they do not care about the over all economy, only which individual companies can return a profit. We again encounter the old game theory problem.. the individual players do not have an incentive for a strong general economy, the government does.
        • by Fast Thick Pants ( 1081517 ) <fastthickpants@g ... .com minus punct> on Thursday December 06, 2012 @02:43PM (#42206257)

          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.

          • WTF? The link that YOU provided clearly shows it's at least $27bil. Or did you not count "investments" in electric vehicles?
            I suppose you can define "green" however the hell you want to but outside of the spin machine, normal people can see - exactly - what is going on. Solyndra. A123. etc....

            Go look at the pinnacle of the new green economy: Greensburg, KS. [wikipedia.org] Remember that place? Yea, we don't either because we all knew it was a big joke.
        • by Sarten-X ( 1102295 ) on Thursday December 06, 2012 @03:15PM (#42206685) Homepage

          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.

          • Nonsense. The whole point of government is that for a given human population, perhaps .001% of the human beings might be capable of administering Justice without their actions being completely shameful; so, you put them in charge of administering Justice, and the human race will, in theory, be in a better place than it was without their aid.

            The problem is, of course, like anything that has existed for several decades, let alone two centuries, mutation, evolution, or, as we say in the programming world, scop

        • Also, you might compare those numbers to the gross sales of the businesses involved, or better, their aggregate taxes.

      • by Bigby ( 659157 )

        And that was some counter to the GP? Or were you just amending cases of how the government has been wasting money, screwing up the economy by including the likes of the oil and banking industries?

      • I assume your first argument is the standard "appeal to tradition" and the second one is a special pleading for the "green energy" industry, that it's "hard". It's "hard" to safely and effectively survey new oil and gas deposits, drill wells, pump it out, ship it, refine it, and distribute it without breaking any government regulations. I won't even go into what is required to build coal or nuclear power plants.

        The fact is that government should not be talking about "investing" and other words that refer

      • There is one critical difference between the examples you give and A123.

        You referred to special breaks given to an industry as a whole. In theory anybody could set up a oil / agribusiness, etc. and enjoy those breaks. Dirty but open.

        A123, on the other hand, was given preferential treatment that only they got. If I open a battery business tomorrow I may not enjoy the same break. Dirty and closed. That to me represents a greater danger because now awards are offered to who you are instead of what you are doi

    • by Anonymous Coward

      Plural of anecdote is not data. Hence the [Citation Needed]

    • True... real business men don't need federal grants to create their money making machines. Quality is their problem, that's a symptom of bad decisions from the top down.
      • by jimicus ( 737525 )

        Very, very few businesses fail for a single reason. Similarly, very few businesses are successful for a single reason.

    • by Anonymous Coward

      Nope, nothing never.

      What a flop the internet and space programs turned out to be.

    • Good, to whom?

      I'm sure a number of people hoovered up some of that money before it was pissed away.

      That's the oldest business model around. Create business story, grease politicians, lobby for handouts, create shell of a company for plausible deniabilitiy while diverting as much money as you can, Profit!

    • That's odd -- everywhere I look, I see government intervention done well. The road outside my door? Government. FedEx charges 20x what the government does for a letter (and delvers to fewer places). Even the Internet was a created by the government very thoughtfully creating a computer network.

      In this case, our government has seen that batteries are important (which should be a "duh" -- a big chunk of the cost of, e.g., Tesla is the batteries), that advanced chemistry and processes will win, and that we

  • by hpa ( 7948 )
    The whole point of private free enterprise is that risks can be taken, with the hope of a big payout. Well, guess what, sometimes it doesn't pan out. That's the system, it is how it is meant to work.
    • by Anonymous Coward

      Except when government invests it's not a 'private free enterprise'...I have no problem with government investing in 'fundamental research', much of which may not ever pan out but throwing away money like this is irresponsible. Why wasn't the money tied to regular reports to a CPA or Management type? Demonstration of a 'solid business plan' etc. how can a company who is losing money every year and with minimal sales get ANY funding...I don't subscribe to notions of Obama 'throwing money at his friends' but

      • it's extremely irresponsible of ANY government to invest in a company without doing the normal work that say an 'Angel Investor' would do.

        The problem with your scenario is that the private investors already looked at it and declined to invest. Any company that comes to the government for capital, is almost by definition a bad investment.

        ... or just get out of business entirely.

        Ding ding ding!

      • by Bigby ( 659157 )

        This was akin to "fundamental research". It isn't the government's job to do high risk investments. IMO, it isn't their job to most investments. I think they should only do investments that help provide everyone with an equal opportunity to succeed in life. Venture capital doesn't fall under that umbrella.

    • by LehiNephi ( 695428 ) on Thursday December 06, 2012 @01:42PM (#42205639) Journal
      The problem is that it wasn't exactly a private free enterprise. They received a $17.1m loan guarantee from the federal government, without which their plant would not have been built. Investors saw them as a bad risk, and appropriately declined to invest in them.
      • by h4rr4r ( 612664 )

        So we should never build any nuclear power plants?

        All of those are built with government backed loans and are insured by the government as well.

    • The whole point of private free enterprise ...

      Except that it wasn't "private free enterprise". A123 Systems received hundreds of millions of dollars in taxpayer subsidies.

      Government funding of basic scientific research makes sense. Government funding of manufacturing is idiotic. If private investors are unwilling to put up their own money to build the factory, that is a good sign that the factory is not going to be economically viable.

  • http://finance.yahoo.com/q?s=aoneq&ql=1 [yahoo.com]

    any acquisition news means big jump.

    • Ah! Failed companies and penny stocks. People gleaning the refuse of the stock market like vagrants to discarded cigarette buts.

  • Bullshit. (Score:5, Interesting)

    by Anonymous Coward on Thursday December 06, 2012 @01:37PM (#42205571)
    A123's 'success' was built on DOE funded research dollars that went to MIT. This money was used to develop key patents that were then 'auctioned off' to A123. A123 just happened to be a company set up by the head researcher whose name appears on the MIT patents. Of course, he was only a minority shareholder as it was the cigar-smokers who get to be the majority shareholders. None of these cronies know anything about actually running a company, but they can certainly sell shares, which is what they did. I tried to find out how to get in on these patent auctions and the process is so guarded that an outsider can't even find out how it goes down. When I tried to inquire about it, I was immediately sent to an MIT public relations officer who would only give me long sermons about all these studies that have demonstrated that since Congress passed the laws to create patents and grant exclusive licenses on technologies developed with public monies it's been nothing but unicorns and rainbows. I finally had to hang up on the guy when he wouldn't even respond to any question I tried to ask him. He just kept spewing his propaganda like a fucking robot.
    • by SydShamino ( 547793 ) on Thursday December 06, 2012 @02:22PM (#42206017)

      He was a robot. MIT patented a Turing PR bot. That patent is going to auction next week actually, but I'm not going to tell you the details...

    • A123 had other problems as well. The batteries they produced were worse than other Lithium batteries in almost every way. Heavier, lower energy density, fewer cycles, etc... Their only advantages was that they could be charged quickly and they kinda resembled (but weren't interchangable) batteries people were used to seeing at the supermarket.

      As LiPo batteries evolved, they were able to charge more quickly and their energy density has gone through the roof.

  • Is this the supplier of the batteries in the Fisker Karma cars that burned in the Sandy flood?

  • Question:

    How'd A123 fall so far, so fast?

    Three words later...

    its reliance on just two big customers

    Answered

  • by boethius ( 14423 ) on Thursday December 06, 2012 @02:00PM (#42205787)

    ... so-called "green/cleantech" I can say unreservedly it was about 99% hype and 1% reality. They dropped at least $2B in their attempt to diversify their portfolio into greentech and acquired a number of companies - including the one I worked for - to buy their credibility in the solar panel marketplace.

    As it turned out, said marketplace - and greentech in general - was and is a bust. Rich yuppies are basically the only ones that can afford to purchase, install, and maintain solar panels even with massive State and Federal government subsidies both in the U.S., Europe, and elsewhere. Given the very poor efficiency of solar panels and their very long term ROI, those yuppies are the only ones with more money than good sense.

    For all Al Gore's, the UN, and pro-globalists' hand-wringing over AGW (and I'm not here to get into THAT debate), the reality is that most people and therefore most businesses aren't particularly concerned about climate change. When the economy tanked in the 2008-ish time frame, the corporation I worked for - the world's largest semiconductor equipment company - said they had, in their 30+ years in business, NEVER see demand drop off a cliff the way it did. Consumer demand for electronic gadgets quite literally disappeared and did so almost overnight. It was a stunning hit to the solar plexus of that industry. Needless to say, a year on I was laid off.

    Greentech far from saved them - and, thankfully, at least it was mostly THEIR OWN dollars they spent on greentech investments -- and it turns out the vast majority of the dollars they dumped into those investments turned out to be giant loss. It was nearly all hype and very little reality.

    On a mundane level I don't have a huge problem with the Federal government taking big bets on cutting-edge technology that private industry typically can't afford. Note: NASA, the Military in general (from whom we have GPS among many other military-to-private sector innovations to thank for), and of course DARPA from whom we may not have this little thing called the Internet.

    Even if there was no real skepticism around climate change I don't believe it would matter. The money the UN wants from the major nations to "fix" climate change would end up being a giant slush fund for lavish UN diplomat expenses. I'd bet big money not a dime would go to any good or positive net effect to supposedly fix or even seriously address climate change issues beyond expensive committees filing expensive 500-page reports and jet-setting between Dubai and New York and London and Tokyo to confab with like-minded global elitists. Climate change isn't something that will be fixed on a macro scale. That, among many other reasons (i.e., the general massive corruption and ultimate pointlessness of the UN), is why so many nations are resisting funding this cluster. Many people are struggling to merely survive in this world - in fact, the vast majority of the global population is in that bind - and concern over how many hydrocarbons they're pumping into the environment is of zero to less-than-zero concern.

    • by ETEQ ( 519425 ) on Thursday December 06, 2012 @02:50PM (#42206335)

      For all Al Gore's, the UN, and pro-globalists' hand-wringing over AGW (and I'm not here to get into THAT debate), the reality is that most people and therefore most businesses aren't particularly concerned about climate change

      Lets be a bit more honest here: you don't have to be a "pro-globalist" to be worried about Climate Change. The science is the same regardless of the politics (even if political pre-conceptions make people want to ignore it). And I think it's not reasonable to say that if most people were concerned the businesses would be as well. They all have a vested interest in the status quo and hence will nearly always be behind the direction the people (or scientific results) are going. It's only in the ideal free market fantasy that this isn't true.

      Climate change isn't something that will be fixed on a macro scale.

      This is a pretty close-minded attitude, and this sort of thinking is most likely the main thing that may indeed prevent it from being fixed this way (or at all). Just because some greentech doesn't work, that doesn't mean none of it will. Hydroelectric power requires massive funds that are almost always public sector, and it's enormously successful (and profitable in many cases if you consider the net benefits). It's just conveniently ignored by those who decry "wasted" greentech money.

      While the laws of physics are deterministic (at least at this scale), the laws of human behavior are not. Plenty of macro-scale activities have profound effects on our micro-scale behavior.

      Many people are struggling to merely survive in this world - in fact, the vast majority of the global population is in that bind - and concern over how many hydrocarbons they're pumping into the environment is of zero to less-than-zero concern.

      This is a very good point. But if Climate Change is real, the vast majority of the future global population's lives depend on us solving it. So we should be expending enormous resources to convince them that they should be concerned (or better yet, help lift them out of desperation).

    • When someone says greentech or cleantech or whatever cute word they like to use you know they're talking finance and/or PR and not technology or reality. The reality is that we're constantly inventing slightly better PV panels, batteries and fuel cells. I think it's obvious at this point that some of these products will eventually become competitive.

      I think what's going to happen from a US point of view is that there is going to be a lot of money in buying these products in China and distributing them and i

  • How'd A123 fall so far, so fast?

    Let's see: They have a ton of debt, a recall that cost them $55 million, and their biggest customer is Fisker who has a cool but expensive product that is selling slowly, and new customers are coming online slowly. Basically crushing debt, a big screw up and insufficient revenues. Pretty much the fastest way I know of to get to a bankruptcy filing. If a buyer gets them post bankruptcy they probably will have a pretty good business without the debt obligations.

  • A $60M reduction in orders isn't what puts you out of business when you are a company with $900M in debt. You're doomed either way.
  • From the story it looks like it could be tied to bad management, failing to do the due diligence and ensuring that the product was correct before you sold and shipped millions then trying to keep it under wraps? Seriously stand up and admit your wrong so you can fix them and survive to live another day.
    • by Anonymous Coward

      Thanks for your wisecracking. As a matter of fact, even the big, established corporations (from Boeing to Daimler) are challenged to "get products right". Even their financial resources are actually quite limited. They have dozens of R&D projects ongoing and each of these might easily eat 100 millions a year. Their senior management makes mistakes which cost dozens of billions, then comes a financial crash and finally, a "80% done" R&D project must be "completed in three months". Despite the fact th

      • ..and at the end of the day, bad managers buckle to pressures and force out releases even when engineers guaranteed the product will have serious failures if released without more work. I've seen this in FDA regulated life support software (to be fair it wasn't actually supporting life, it was however supporting diagnoses and writing device prescriptions). This is just the common managerial bullcrap of "I know better than the engineers, they're just lowly payed employees, my MBA dictates I'm the important o
  • These news articles are usually (and this was no exception) short on the root of their woes in manufacturing. Is there any more info on that?

    • I was basing this on the court filings of A123 itself, and there wasn't detail about what the problems actually were. There may be more out there on the public record about what exactly the defects were. But A123 just said there were some problems with the "prismatic" batteries that could lead to problems. Sorry I couldn't get more precise.
  • by LoRdTAW ( 99712 ) on Thursday December 06, 2012 @04:18PM (#42207659)

    I know A123 is still doing business, we got an RFQ from them the other day.

    About a year ago we were working with them on their new battery technology. The challenge was to weld the battery electrolyte fill port in a moisture and oxygen free environment. We have a glove box but the big problem was to leak test the cell before it left the environment and that was the hard part. The glove box environment is 90% argon and 10% helium which is used as a trace gas for helium mass spectrometer leak testing. The part goes into a vacuum oven antechamber and held under vacuum (and baked if necessary, usually to get rid of vapors from glues and moisture) until its safe to open the door in the glove box chamber. Once you hermetically seal a part you need the trace gas to already be inside the part and that is why there is a 10% helium mix. The sealed parts are put into a bell-jar on the leak detector and the leak rate is measured in atm-cc/sec, around 5x10^-5 is when liquid water begins to leak. Below that is where you want to be in the 10^-8/10^-9 range or better. The problem is If your environment is already contaminated with helium how do you test a part for leaking helium? There are other methods we use for parts but that requires the part to be removed from the glove box. If the battery is not sealed 100% it will be ruined if any moisture or oxygen gets into the battery. If we catch the leak inside the box then we can repair it.

      I believe that was the major bottleneck in the process, welding shut the battery electrolyte fill port and checking the seal without introducing the battery to air. They could have two glove boxes with a vacuum antechamber joining them, one filled with the trace gas mixed in, the other without trace gas but helium is a pain in the ass to pump out. you would have to do a gas purge and then vacuum it out and possibly another purge then leak check the part.

    We did the development on the job and I don't know what happened after we gave them our solutions.

  • because they decided to name their company "A123"...

    Just sayin'

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