NECN Interview: A123 becomes latest ‘green energy’ failure
(NECN: Peter Howe, Waltham, Mass.) – Two and a half years ago battery-technology pioneer A123 Systems was being feted by President Obama in the White House Rose Garden, hailed by the president as a “green energy” pioneer and major job creator for the future.
Tuesday, after burning through more than $260 million in taxpayer aid, A123 was the latest high-profile green-energy flop, filing for Chapter 11 bankruptcy and bringing back memories of bankrupt Massachusetts startups Evergreen Solar and Beacon Power and California’s Solyndra, whose failure cost taxpayers more than $500 million.
In connection with the filing, A123 is agreeing to sell its automotive technology business, include a two-plant complex in suburban Detroit, to Johnson Controls for $125 million. A123 said it is also looking for buyers for its power-grid, commercial, and government divisions and other operations, and Johnson is also providing $72.5 million in “debtor in possession” financing to fund ongoing operations as A123 pursues sales. The bankruptcy filing does not involve subsidiaries outside the U.S.
“We believe the asset purchase agreement with Johnson Controls, coupled with a Chapter 11 filing, is in the best interests of A123 and its stakeholders at this time,” A123 CEO David Vieau said in a prepared statement. The company had been looking for a $450 million lifeline bailout from a Chinese company, Wanxiang, which failed to come through in recent weeks, and Vieau said the company has abandoned that in favor of the Johnson deal.
Republican nominee Mitt Romney issued a statement Tuesday saying, “A123’s bankruptcy is yet another failure for the president’s disastrous strategy of gambling away billions of taxpayer dollars on a strategy of government-led growth that simply does not work.”
It’s unclear how many of A123’s 1,763 employees worldwide – 322 based in Massachusetts, earning an average of $82,800 annually, according to state data – could lose their jobs or be forced to consider moving to Michigan to work for Johnson Controls.
Aides to Gov. Deval Patrick said Massachusetts taxpayers are on the hook for only $2.5 million, the balance of a $5 million grant from the state Clean Energy Center, the first half of which was forgiven based on what A123 spent building a headquarters at 200 West Street on the Waltham-Weston line and creating jobs. Because the remaining $2.5 million is a “senior secured debt,” given A123’s success raising money from selling divisions, there’s a good chance Massachusetts gets back most or all of that funding, unlike the millions it lost in aid to Evergreen Solar. (Beacon’s been reorganized after bankruptcy and is estimated to have repaid about 70 percent of the federal aid it got.)
Interviewed during a visit to Ashland Middle School, Patrick said, “I think and expect, given the demand for what they make and how successful they are in the automobile industry and other applications, that in some form or another, the company will continue operations, and those jobs will remain in Massachusetts and other parts of the world.”
Patrick also disputed the idea A123 could be considered as another Evergreen or Solyndra failure.
“This isn’t like those companies,” Patrick said. “This is a company that’s going to continue in operation, and companies from time to time reorganize their debts through bankruptcy. That’s a part of business.”
But Jim Stergios, executive director of the free-market-oriented Pioneer Institute for Public Policy Research, called A123’s bankruptcy filing “just one more piece of evidence that this a failed jobs strategy. The government is not good at picking winners and losers, and it’s not working for Massachusetts.” Stergios said of green-energy backers like Obama and Patrick, “They are right that we have to find different investments and different vehicles to produce the energy that we need to have – but I just don’t think the government’s any good at it.”
With videographer David Jacobs and assistant video editor Bob Leone.