A week and a half ago cash-poor A123 Systems, recipient of $279 million-plus in federal money and millions more from the State of Michigan, announced it would access $39 million via a stock sale to institutional investors and the release of other cash after meeting requirements related to its existing reserves.
It has been downhill ever since – all the way down to its all-time low of 75 cents per share price Tuesday (and 69 cents Thursday morning). It may be too much for even these masters of the press release cycle to overcome by creating good news out of thin air.
Seems like every time stimulus recipient battery-maker A123 Systems suffers bad news or a stock price hit, its leaders miraculously produce great news via press release that temporarily bumps shares higher.
The latest example came yesterday, when A123 announced a “technological breakthrough” called Nanophosphate EXT that officials claim would reduce or eliminate the need for cooling systems for overheating batteries, and lower the cost of electric vehicle batteries by $600. This followed news that A123 plans to hire 400 employees (125 were laid off in November) in the coming months, thanks to new contracts it has won. Apparently Wall Street was unjustifiably non-skeptical, as heavily subsidized A123 saw its stock price shoot up from $1.04 to $1.58 yesterday. A123 was given $249.1 million in stimulus funds to help launch two battery-manufacturing plants in Michigan, and also received grants and tax credits from the state that could total more than $135 million.
Officials with the Massachusetts-based manufacturer, which received a $249.1 million grant from the Department of Energy but this week said the ability for the company to continue is a “going concern,” also announced they retained an outside adviser for “evaluation of strategic alternatives.” Translation: they’re looking to sell. If they are successful, A123 President David Vieau and his colleagues stand to reap a windfall even after they laid off 125 factory workers ("Green jobs") in November.
Fisker Automotive has implied that the Texas owner of one of its Karma models committed “fraud” or “malicious intent” in blaming the luxury electric vehicle for his garage fire last week, after he had to rescue his wife, mother and child from flames that spread quickly to his house.
The company’s claim could be a fatal public relations move, as the chief investigator in Fort Bend County Fire Marshal’s Office, Robert Baker, has also blamed the fire on the Karma. Fisker, recipient of $193 million (out of a $529 million total guarantee) loan backed by taxpayers via the Department of Energy, has suffered a series of publicity blunders including two recalls, a Karma breakdown at Consumer Reports’ test facility, a SEC investigation of its primary venture capital raisers, layoffs, and a cutoff of its loan by DOE.
The Obama Administration has over-stimulated the electric vehicle battery market, as companies inspired by the flow of federal stimulus support don’t have enough customers for their products.
The government promise of a coming electric car (and truck) revolution, thanks to moves such as President George W. Bush’s signature to approve a $7,500-per-electric-vehicle tax credit and Congress’s passage of the Recovery Act, instigated a buildup of capacity and inventory for batteries. Now putrid EV sales – including the newly introduced Ford Focus electric – have put their battery makers in peril, according to the Detroit Free Press.
Despite a new report out of the United Kingdom that says the future of the business is bleak without government subsidies, a three-year-old unprofitable electric truck company that received $32 million in U.S. taxpayer stimulus plans to raise more money via an initial public offering.
Just as the Department of Energy gave A123 Systems a vote of confidence by extending a deadline until 2014 to spend down its $249 million stimulus grant, the deeply troubled electric vehicle supplier experienced another setback.