Taxpayer-Funded Green Job Losses Easy as A123

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A123 logoIt’s another day, and another round of layoffs by a recipient of millions of dollars under the Obama Administration’s renewable energy initiatives, administered by the mismanaged Department of Energy.

This time the Recovery Act largesse – taken out of the hide of taxpayers – went to A123 Systems, Inc. The Massachusetts-based energy storage company was given $249.1 million to help launch two battery-manufacturing plants in Michigan. A123 also received grants and tax credits from the state that could total more than $135 million. In a separate federal grant as a subcontractor for another grantee, A123 received nearly $30 million for a wind energy storage project.

In the Wolverine State, the company will lay off 125 employees at the two plants in Livonia and Romulus. Officials said diminished production by a top customer – Irvine, Calif.-based Fisker Automotive – led to the cutbacks. A123 had expected to deliver batteries for 7,000 plug-in hybrid Karma models, but faulty wire harnesses in the vehicles reduced Fisker’s production to 1,500 for 2011, according to Crain’s Detroit Business.

NLPC’s Mark Modica reported in late October that Fisker itself benefitted from a $529 million loan from the Department of Energy. The Karma is priced at $97,000, has a range of only 30 miles per electric charge, and after that gets only 20 miles per gallon of gasoline. The car will be produced in Finland and is eligible for the $7,500 federal tax credit for purchasers. And a venture capital firm where former Vice President (and global warming guru) Al Gore is a partner is heavily invested in Fisker, and executives with the firm have contributed more than $1 million over the last two decades to mostly Democratic candidates and causes.

As for A123, which is also invested in Fisker, company executives there also have a penchant for supporting Democratic campaigns. According to records compiled by the Center for Responsive Politics, nearly $22,000 was donated to Democrat candidates during the 2008, 2010, and 2012 election cycles. A single $1,000 donation went to the Senate campaign of Republican Scott Brown in 2010. And A123 President and CEO David Vieau gave then-Senator Barack Obama $2,300 three weeks before he was elected president in 2008, and has given $5,000 to the Democratic Senatorial Campaign Committee during the last two years.

Vieau was also featured in a 30-second spot in late 2009 to promote energy and climate legislation promoted by President Obama and his fellow Democrats:

Environmental activist group Ceres produced the ad for its “We Can Lead” program. That project was led by communications consultant Michael Meehan, who was senior communications adviser for Sen. John Kerry when he ran for president in 2004. Meehan also has held the top political and communication posts to all three national Democratic parties, and has served in top advisory positions for several Democrat Senators and Congressmen. Vieau and another A123 co-founder, Gilbert Riley, Jr., have given Kerry $8,000 for his Senate campaigns in recent years. Vieau also gave $3,900 to Rep. Ed Markey, D-Mass., who was the chief co-sponsor of the Waxman-Markey climate legislation a couple of years ago.

As another “face” of the “successes” of the president’s Green energy policies, Vieau was rewarded with a Rose Garden press conference that promoted A123:

“Truth be told,” the president said, “A123 was looking to build that factory in Asia. But because it received that grant, it chose the State of Michigan for its largest and most innovative plant yet….So this is what’s possible in a clean energy economy.”

Vieau and company – like so many of the fledgling “Green tech” firms that President Obama and Steven Chu’s DOE think are worthy of taxpayer “investments” – is in a seemingly endless spiral of deficits. A123 suffered net losses of $85.8 million in 2009 and $152.6 million in 2010.

No wonder why Vieau said in a promotional video for Michigan economic development interests, after receiving the promise of $135 million, “The Michigan Economic Development Group, the (former) governor (Democrat Jennifer Granholm), the people we’ve dealt with have been most responsive, have stepped up in a significant way in support of the issues we’ve raised, to make the battery industry more cost competitive.” Do ya think? Any business that needs taxpayer money to become viable is an inherent loser, and does not deserve to survive.

But the proof of unworthiness does not end with the last two years’ losses. Check out a few statements from A123’s most recent quarterly report under “risk factors” with the Securities and Exchange Commission:

·      “We have never been profitable.”

·      “As a public company, we have incurred and will continue to incur additional significant legal, accounting and other expenses that we did not incur as a private company. These increased expenditures will make it harder for us to achieve and maintain future profitability.”

·      “We anticipate that we will continue to have negative cash flow for the foreseeable future….An inability to generate positive cash flow for the foreseeable future or raise additional capital on reasonable terms may decrease our long-term viability.”

·      “Our principal competitors have, and any future competitors may have, greater financial and marketing resources than we do, and they may therefore develop batteries or other technologies similar or superior to ours or otherwise compete more successfully than we do.” (Some of the competitors mentioned by A123 are well-financed and established, including Bosch, Samsung, Dow Chemical, Sanyo and Panasonic).

·      “To fund our growth over the next 12 months, including anticipated future losses, purchase commitments, and capital expenditures, we are taking actions to reduce the cash used in operating and investing activities including plans to improve our gross margins, reduce our operating expenses, and increase inventory turns.”

Apparently that last statement explains the 125 layoffs, which the company said will return, after having just announced its 1,000th Michigan hire in August. But through the end of September this year, A123 had a net loss of $172.8 million, and is heavily in debt. The mayor of Livonia, Jack Kirksey, said, “They’ve got this pile of batteries sitting there waiting to be put in cars when they manufacture them.” With much lower-than-expected sales of Chevy Volts, Nissan Leafs and Fisker Karmas, the reduction of A123’s inventory may be a long time coming.

“The company says the layoffs are temporary, but the way things are going right now, who knows if they'll ever come back,” said market analyst Travis Hoium of The Motley Fool, who was also a former research and development engineer. 

Like Solyndra, and Fisker, and Ecotality, and countless other recipients of President Obama’s clean energy “investments” of other peoples’ money, A123 is essentially a welfare dependent. They cannot survive without the taxpayers. If they had to earn business on their own, they’d fold. And because of their dependency status, they have no incentive to compete on the free market when it’s much easier to play the crony capitalism game.

It’s an industry only government and socialist environmentalists could love.

Paul Chesser is an associate fellow for the National Legal and Policy Center.

Related:

Green Money Hole: Subsidized Battery Maker Bleeds (Washington Examiner)