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Throwing money at very bad bets

December 5, 2012
Messenger News

Solyndra may be the most well-known example of federal fiscal ineptitude, but another company's trouble after receiving hundreds of millions of federal dollars is making its way into the public eye. A123 Systems Inc., which makes lithium batteries for electric cars, filed for bankruptcy in October.

But on the very day it filed for bankruptcy, A123 received a nearly $1 million payment from the federal government. That payment was part of the $249 million clean energy grant it received in 2009.

Then, A123's Chief Executive David Vieau said "The capital provided by the DOE's investment will help us speed our growth and better compete in global markets." Meanwhile, A123 was also raking in a $5 million forgivable loan from the state of Massachusetts, $16 million in grants and loans from Michigan, and reaping the benefits of tax credits worth more than $125 million.

President Barack Obama and his administration were so desperate to shore up the market for electric vehicles, it appears they continually failed to do even the most cursory of research. In this case, nearly $400 million of outside help could not keep A123 out of bankruptcy.

Now a Chinese company is among the candidates to acquire A123's assets. Its president, Pin Ni, has taken pains to ease fears about the loss of U.S. jobs.

But there is more than domestic job loss to consider. Two U.S. senators have asked Treasury Secretary Timothy Geithner to review any possible sale to make sure technology paid for by taxpayers does not end up in China. A123, as it turns out, also had contracts with the U.S. military.

One analysis of the company's financial situation showed it "has been bleeding red ink since 2001. In the past five years, the company has lost $877.7 million, including a loss of $269 million through August."

A clear picture of the kind of company at which it planned to throw money was readily available to federal officials in 2009. They ignored it; and, yet again, taxpayers are footing the bill.

 
 

 

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