Aug 9 Early in 2012 President Barack Obama
responded to critics of his multi-billion-dollar green
technology initiative by saying he was "not going to cede the
wind or the solar or the battery industry to China."
Six months later, he faces that very real possibility for
the U.S. car battery industry, a once-high flying sector
buttressed by generous federal grants, but struggling with a
green car market that has fallen far short of expectations.
A123 Systems Inc on Wednesday became the second
U.S. government-backed battery maker this year to go overseas
for a lifeline - and it turned to China. Auto parts supplier
Wanxiang Group will take a controlling interest and invest $450
million in the Massachusetts-based battery maker, which faced
running out of cash by the year-end.
Earlier this year, Ener1 Inc, another battery
maker that received a government green technology grant, emerged
from Chapter 11 bankruptcy under the control of Russian investor
Boris Zingarevich. New York-based Ener1 is also a joint-venture
partner in China with a Wanxiang subsidiary.
In the past three years, U.S. battery makers, anticipating
consumer demand for green cars that never materialized, have
over built production capacity, often with government funding.
Electric vehicle and hybrid sales for the first seven months
of the year totaled 270,000, representing only 3 percent of
total U.S. car sales, according to the green-car website
As part of the 2009 American Recovery and Reinvestment Act 's
E lectric Drive Vehicle Battery and Component Manufacturing
Initiative, A123 was awarded a grant of $249.1 million. Ener1
subsidiary EnerDel was awarded $118.5 million to manufacture
advanced lithium-ion batteries for electric and hybrid vehicles.
A123 promised to create 38,000 U.S. jobs, including 5,900 at
its own plants. A123 said on Thursday it has 1,300 workers.
Theodore O'Neill, a former equities analyst with Wunderlich
Securities, said A123 "built a factory that's big enough to meet
demand that's probably not going to materialize until 2020 ...
They built it much larger than the market turned out to need."
FINDING 'PARTNER' FOR U.S. JOBS
That kind of underperformance provides new fodder for
Obama's opponents in the Republican Party with just three months
until election day.
Obama has spent months battling critics of the
administration's green-tech initiative in the wake of the
high-profile bankruptcy of solar-panel maker Solyndra.
"It's not going to be a smooth, easy ride ... Some companies
will fail," he said in his State of the Union speech in January.
But tempering expectations has done little to quiet the
critics in Washington, who ramped up their attacks on Thursday
with the added accusation of putting technology in Chinese
"Once again it appears the Department of Energy and the
Obama administration have failed to secure sensitive
taxpayer-funded intellectual property from being transferred to
a foreign adversary, which raises serious national security
issues," said Rep. Cliff Stearns. Stearns is a Florida
Republican and chairman of the House Energy and Commerce
Committee's Subcommittee on Oversight and Investigations.
A123 spokesman Dan Borgasano said on Thursday that, with
Wanxiang's bid to take control of the battery company, "our
intention is to continue to build in the United States and reach
certain job levels. We think we found a partner to help us do
that ... I don't think we'll necessarily be making hard and fast
After it received the DOE grant, Ener 1 said in early 2010
that it planned to create 1,400 jobs at its Indianapolis battery
plant. Today, the plant employs around 250. The plant was
designed to produce battery packs for up to 600,000 hybrid
The companies' struggles with over capacity are typical of
an industry whose fortunes are tied directly to those of
electric and hybrid vehicle manufacturers.
"There was a bit of a rush to put in capacity that really
wasn't justified by the events as they turned out," said Tom
Gage, president of EV Grid, an infrastructure company based in
Palo Alto, California. "In retrospect (the industry) was
over-optimistic in terms of projecting the rate of growth for
demand for car batteries."
Charles Ebinger, head of the energy security initiative at
the Brookings Institution, said controversies surrounding
government-backed companies such as A123 will make lawmakers
hesitant to support expanded funding of clean energy, especially
with federal budget battles looming.
"I think it's going to slow down," Ebinger said. "It's going
to be increasingly difficult to argue for subsidies for any