A123 Systems: The Next Solyndra?

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NLPC Associate Fellow Paul Chesser was a guest Monday on The Willis Report on the Fox Business Network. Here's a transcript:

Gerri Willis: Another company falling under the headlines - the next Solyndra. Why one battery maker may be headed towards bankruptcy and what it got from taxpayers. Coming up.

Gerri Willis: After a $249 million dollar stimulus grant from the federal government you would think electric car battery maker, A123 systems would be in great financial shape. So, then, why is it being dubbed the next Solyndra? Here to weigh in is Paul Chesser an associate fellow for the National Legal and Policy Center and Robert Bryce, a senior fellow for the Manhattan Institute. Robert, let's start with you. What the heck is wrong with this company? I mean, you look at this. They got all kinds of federal dough and losses, red ink for days. Why are they such a failure?

Robert Bryce: Well, I mean, the short business answer, Gerri, is that their, their losses are growing faster than their revenues, and they're depending that's the business case. But, they're depending on the electric vehicle sector for their future and as could have been predicted easily had the Obama looked closely at the history of the electric vehicle business, the market is not developing. The customers for EVs are staying away in droves.

Gerri Willis: Yes. It's not been popular with consumers. Paul to bring you in, I want to talk about this battery explosion with A123. Somebody had to go to the hospital. What exactly happened there?

Paul Chesser: Well, the details aren't, there's only a few details, but we know it's one of A123's batteries. They've got the contact with GM to provide the battery for the next coming vehicle, the Spark, which is going to follow the Volt which has not been selling very well as Robert said. But the timing on this is amazing. This came the same day that the Department of Energy announced they would extend A123 for two more years, given two more years to spend down the grant money, which is just the timing on this is mind boggling.

Gerri Willis: Wow. That is mind blowing. All right. Robert, to you, you know, this isn't the only failed green company. We have Beacon Power, Range Fuels, Ener1, you name it, it is there. What's the takeaway here?

Robert Bryce: Well, I think it's clear that with all of these grants and a lot of these loans, the Obama Administration has been in the business of trying to pick technology winners and that's not the role of government. I'm for the government trying to do basic research, R&D and in energy issues, energy technologies, but what we've seen with this Obama Administration is a lot of trying to pick winners, and they've been picking very badly.

Gerri Willis: And you say picking winners in the electric vehicle industry in particular is a big mistake. Paul to you, we've had two point four billion in grants dished out. And what do we have to show for it?

Paul Chesser:  Well, we have a lot of mistakes. We've got EV companies like Fisker and A123 and Ener1. You know, this A123 Company looks a lot like Ener1, which has already filed bankruptcy in that. They were both each dependent on a small electric vehicle company that are struggling or went down. And so, A123 is in a similar situation, Ener1 was. So, it's just a bad judgment. It's hard to understand what the Department of Energy is doing. They cut off Fisker. Fisker was A123's biggest client. They cut Fisker off, but they extended A123. It makes absolutely no sense.

Gerri Willis: That is crazy. All right. You know, you look at this, Robert, and you say, listen to the rhetoric which is essentially, you know, electric cars, someday, they're going to be the biggest thing since sliced bread. It is coming, it's coming, it's coming. Let's invest early so that we have the technology on hand and we can lead in the industry. What's wrong with that?

Robert Bryce: Well, Gerri, the history of the electric car is a century of failure tailgating failure. We've seen this. We've heard this before. That, oh, just a few years electric cars are going to be viable. If only oil prices are high enough, batteries are good enough. We've heard this since the early nineteen hundreds. There's nothing new here. Electric cars are the next big thing, and they always will be.

Gerri Willis: I know you love to say that. And they've been around for how long? What was the first year that somebody said, hey, let's build an old electric car?

Robert Bryce: Well, remember, Thomas Edison thought that there was a future in electric cars. And then, Ford developed a good, reliable internal combustion engine, and Edison immediately said, you know, I don't think this is going to work. The range is too small. The range is not sufficient. Gasoline is the going to be the vehicle of the, gasoline and oil fueled cars are going to be the vehicles of the future. He's been proven exactly right.

Gerri Willis:  Paul what are the technical impediments to these actually becoming something that the average American would want to buy and would actually benefit from buying?

Paul Chesser:  Well, Robert might be a little better to answer that question but he's right. It's been around for a hundred years. You go online, on YouTube, and you can look up at Jay Leno electric vehicle. He'll show you and demonstrate to you that this technology has been around 100 years and it's no different now than it was then. They take too long to charge. They take at least thirty minutes, if you can get the real fast charger which are hard to find. They cost a lot up front as we've seen with the Volt and the Nissan Leaf. And, they're just, they don't go far enough. They don't go even a hundred miles yet...

Gerri Willis:  Got a long way to go with these vehicles. You know, and with all development of the other energy sources, it just seems bizarre to me to be, you know, continuing down this failed path as you guys so rightly put it. Thanks for coming on tonight. Paul and Robert, appreciate your time.

Paul Chesser: Thank you.

Robert Bryce: Thanks a million, Gerri.