Electric Car Crash Obama’s Green Energy Industrial Policy Turns up in Chapter 11.see note please
http://online.wsj.com/article/SB10000872396390443675404578060882850041910.html?mod=opinion_newsreel
When asked about high gasoline prices President Obama cooed about the future cars that will get 75 miles an hour on his hot air effusions….. Here is another big flop ….. rsk
Mitt Romney quipped in the first Presidential debate that the problem with the Obama Administration’s green energy investing isn’t that it tried to pick winners and losers, but that “you pick the losers.” He was being generous. Another big green Administration favorite went belly-up on Tuesday with the Chapter 11 filing by battery-maker A123 Systems Inc.
Massachusetts-based A123 is—or was—part of President Obama’s grand design to build a U.S. electric-car industry more or less from scratch. The company was founded by entrepreneurs in 2001 to make lithium ion phosphate batteries and attracted private investment from the likes of Sequoia Capital and GE. Then Washington picked up the green energy fad.
As Mr. Obama put it in August 2009, the government would create an “infrastructure of innovation” by doling out “$2.4 billion in highly competitive grants to develop the next generation of fuel-efficient cars and trucks, powered by the next generation of battery technologies, all made right here in the U.S. of A.”
In a September 2010 congratulatory phone call to A123’s Livonia, Michigan plant, Mr. Obama called it “the birth of an entire new industry in America.”
Democrats were explicit that this was an attempt to rehabilitate the idea that government could nurture new industries. As Michigan Senator Carl Levin said in a 2011 speech, A123’s factories “are a forceful rebuttal to those who argue against public investment in this field, people who label this ‘industrial policy.’ In the not too distant past, that label—’industrial policy’—was the kiss of death for any proposal. That’s an ideological hang-up that we’ve now overcome.”
One not-so-ideological hang-up: The technology and market for such an industry didn’t and still doesn’t exist for commercially profitable levels of production. Electric-battery storage in particular has bedeviled technologists for decades. But rather than fund basic research—arguably a role for government—Mr. Obama and his green friends decided to play venture capitalist and industrial planner. With your money.
The Bush Administration gave A123 a $6 million research grant in 2007. But the company hit the jackpot in August 2009 when Mr. Obama’s Department of Energy announced a $249 million grant. No strings attached and not even a taxpayer equity stake. The cash was supposed to build three plants in Michigan that would create “more than 3,000 [jobs] by the end of 2012,” according to Mr. Obama.
The A123 batteries needed a market, so the government tried to finance that too. In April 2010, the Energy Department gave Fisker Automotive a $529 million loan to develop and produce plug-in hybrid cars—for which A123 would supply the batteries.
Fisker was supposed to be producing cars this year at an old General Motors-United Auto Workers plant in Delaware. Vice President Joe Biden traveled to Delaware himself for the plant reopening. But Fisker has struggled with reliability issues, car recalls and management changes. In August, a Fisker Karma vehicle caught fire in a parking lot in California, thanks to a defective cooling fan. The Energy Department froze Fisker’s credit line last year.
As for A123, it also struggled with quality-control problems and competition from low-cost producers in Asia. China’s Wanxiang Group offered A123 a lifeline in August, but Tuesday that deal fell apart.
Johnson Controls, the Fortune 500 giant, will now pick up the pieces and finance A123’s bankruptcy. Johnson Controls received a $299.2 million grant from the Obama Administration in 2009 to build advanced batteries. Johnson Controls is a respected enterprise, but does a company with a fiscal 2011 net income of $1.6 billion really need taxpayer subsidies?
More than any single failure, the larger lesson here is the eternal one about the folly of government industrial policy. Someday someone will find a way to store electric power for long periods, and someday someone may build a commercially viable electric car. We will be the first to cheer.
But the second to last people in the world to know when that day arrives will work for the Department of Energy, and the last will be U.S. Senators. In 2008 President Obama sold voters a fairy tale about millions of “green jobs” that he could conjure up merely by “investing” taxpayer money. The 2012 election is in part a referendum on whether Americans can be fooled again.
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