The theory was that the federal government could guide an entire US electric vehicle (EV) industry into existence by orchestrating a constellation of grants, loans and loan guarantees to manufacturers and infrastructure developers, along with generous tax credits for purchasers. That vision was attractive, because EVs have the potential to be an important element of a long-term strategy to counter climate change and bolster energy security. However, yesterday’s bankruptcy of battery-maker A123 Systems, Inc. provides a costly reality check. Along with the earlier bankruptcy of another advanced battery firm, Ener1, and disappointing battery-EV sales, it raises new doubts concerning both the government’s model of industrial development and the achievability of President Obama’s goal of putting one million EVs on the road by 2015. A123 was built around a novel lithium-ion battery technology developed at MIT. For a time they were the darling of the advanced battery sector, with a market capitalization above $2 billion following its 2009 initial public offering. That IPO came on the heels of A123′s receipt of a $249 million stimulus grant from the Department of Energy and $100 million of refundable tax credits from the state of Michigan. Subsequently, though, they experienced low sales and a costly battery recall that contributed to their signing a memorandum of understanding with China’s Wanxiang Group to sell an 80% interest in the company for around $450 million. Instead, it now appears that Johnson Controls, a diversified company that was the recipient of a $299 million DOE advanced battery grant of its own, will end up acquiring A123′s assets for around $125 million. Johnson is apparently providing “debtor-in-possession” financing for A123′s Chapter 11 process. It’s not clear whether Johnson would be able to draw down the unused portion of A123′s federal grant. Because of the government’s close involvement with A123, and in particular its structuring of aid to A123 in a manner that left taxpayers without any call on the firm’s assets ahead of suitors like Johnson Controls or Wanxiang, this event is inherently political. I was a little surprised it didn’t come up in last night’s presidential debate. If it does become a “talking point” in the next two weeks, however, I’d prefer to see the conversation focus on the real issues it raises. The reasons for A123′s failure appear very different from those behind the much-discussed failure of loan-guarantee recipient Solyndra. While the latter ultimately called into question the judgment of officials who loaned money to Solyndra when that company’s business model was already doomed, A123 highlights the much deeper challenges involved in attempting to conjure an entire industry out of thin air. The earlier failure of GM’s electric vehicle effort in the 1990s, the EV-1, demonstrated the chicken-and-egg nature of EV sales: Vehicle sales depended on recharging infrastructure that in turn depended on robust vehicle sales to justify infrastructure investment. But at least GM could begin then by relying on a mature lead-acid battery industry. Those batteries turned out to be inadequate to meet consumers’ expectations of range and recharging convenience, which led to the creation of another chicken-and-egg dependence for the new EV industry: carmakers needed a reliable supply of advanced batteries from producers who couldn’t invest in the capacity to make them, without knowing that vehicle sales would consume enough batteries to turn a profit. So in 2009 the administration set out to short-circuit all those inter-dependencies by simultaneously funding the key elements of these loops, including advanced battery makers. It makes me wonder if anyone involved had any direct manufacturing experience–a natural doubt considering that the entire US auto industry was restructured in 2009 by a task force without a single member who had worked in any manufacturing business, let alone the auto industry. The main causes of A123′s failure appear to have involved basic manufacturing issues of capacity utilization and quality control. The company wasn’t selling enough batteries to cover its costs, and too many of the batteries it sold came back in an expensive recall. They weren’t the first business to experience such growing pains, but their challenges were compounded by the burden of a manufacturing line that had been sized to meet the demand of an EV market that hasn’t yet materialized. US EV sales through September amounted to just 31,000 vehicles, or less than 0.3% of total US car sales. The picture looks even worse if you subtract out sales of GM’s Volt and Toyota’s plug-in version of its Prius, the gasoline engines of which provide essentially unlimited range, circumventing the limitations of today’s batteries. I think there’s a strong argument that the government’s assistance to A123 was actually a key factor in leading them to bankruptcy, by prompting A123 to grow much faster than could have been justified to its bankers or private investors. Perhaps it’s some consolation that A123′s technology has apparently been snapped up by a competitor, rather than going the way of Solyndra’s odd solar modules. Yet that outcome hardly justifies the casual dismissal of A123′s fate by a DOE spokesman as a common occurrence in an emerging industry. That sort of talk merely perpetuates the perception of cluelessness fostered by Energy Secretary Chu’s failure to hold anyone accountable for the Solyndra debacle. Yes, companies in emerging industries fall by the wayside, but the preferred response would be to examine what happened and apply the lessons learned to the rest of the “venture capital portfolio” with which the administration’s industrial policy has saddled the DOE. With EV sales still low and several key EV makers experiencing delays and productionproblems, a thorough public review of the entire EV strategy is in order.
Source: theenergycollective.com
Video: Barack Obama & Mitt Romney in feisty clash
A123 Declares Bankruptcy, Failure Could Be Bad For Obama
Electric car battery maker A123 filed for bankruptcy today, just a few hours after warning it was about to default on its loans, and will be taken over by auto supplier Johnson Controls. As a recipient of $249 million in grants from the Obama administration, the company’s bankruptcy will no doubt become another embarrassment heading into the November elections. Republicans have already battered the Obama administration for investing $535 million in solar panel maker Solyndra, only to see the company fail just two years after receiving the loan. The company shut its doors and fired all its workers in August 2011. But it is also litigating against Chinese solar panel makers, charging that China illegally “dumped” solar panels into the U.S. at a loss to drive makers like Solyndra out of business. The U.S. has only paid out $132 million of the A123 grant, the Department of Energy said. A123 won’t suffer the same fate: It has already inked a deal to be purchased by Johnson Controls, and so it should stay open and functioning. And it will continue working on making a battery for General Motor’s upcoming electric car, the Chevy Spark. But the bankruptcy could become another hammering point for Republicans who are trying to show President Obama’s investment plans have not worked. The battery maker was supposed to be a shining example of what could happen In April 2010, Obama welcomed the A123 CEO, David Vieau, to the Rose Garden to talk about how clean energy investments would help grow the economy. A123 had promised it would hire 3,000 workers in Michigan by the end of 2012, and open three new plants. But the company has struggled in the past year after a costly recall put it back in the spotlight. The battery maker was forced to recall batteries used in the Fisker Karma electric car at a cost of $51.6 million, and that forced the company to halt production at its Michigan plant. Clean energy investments were supposed to be Obama’s version of the New Deal, pushing government money into industries that could move the economy forward. But consumer acceptance of electric cars has been slower than expected, resulting in excess supply of expensive battery packs. Consumer demand is slowly ramping up, but it’s not meeting the targets set by Obama’s administration. According to the MIT’s Technology Review, the projections for demand far outweigh reality. By 2012, battery makers could have produced 3,900 megawatt hours worth of battery power. But there was demand for just 390 megawatt hours. “It’s still early days for electric vehicles, but the idle factories point to the difficulty of starting a new high-tech industry from scratch,” the magazine wrote. In a blog posting published Tuesday afternoon, the Department of Energy defended its investments in electric battery makers. The policy has had bipartisan support, and investments in battery makers began under the Bush administration. “Four years ago, virtually all advanced vehicle batteries were built overseas, and it looked like the United States might miss out on this enormously important, rapidly expanding market,” said Dan Leistikow, head of public affairs for the DOE, in the blog posting. Thanks to investments in battery makers, the cost of large batteries has gone down from $33,000 to around $17,000, he said. “Most importantly, more and more of those cars and their components will be built right here in America – continuing to support American workers and new technologies that will reduce our dependence on foreign oil,” he said. NOW CHECK OUT
Source: aol.com
A123: "no assurance" we won't go bankrupt *UPDATE
WALTHAM, Mass., October 16, 2012 – A123 Systems, Inc. (Nasdaq: AONE) (“A123″ or “the Company”), a developer and manufacturer of advanced Nanophosphate® lithium iron phosphate batteries and systems, today announced that it has entered into an asset purchase agreement with Johnson Controls, Inc. (NYSE: JCI) in a transaction valued at $125 million. Under the terms of the agreement, Johnson Controls plans to acquire A123′s automotive business assets, including all of its automotive technology, products and customer contracts; its facilities in Livonia and Romulus, Michigan; its cathode powder manufacturing facilities in China, and A123′s equity interest in Shanghai Advanced Traction Battery Systems Co., A123′s joint venture with Shanghai Automotive. The asset purchase agreement also includes provisions through which Johnson Controls intends to license back to A123 certain technology for its grid, commercial and government businesses. A123 also continues to engage in active discussions regarding strategic alternatives for its grid, commercial, government and other operations, and has received several indications of interest for these businesses. To facilitate the transaction process, A123 and all of its U.S. subsidiaries today filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. The Company’s subsidiaries located outside the U.S. were not included in the filings. This action is expected to allow the Company to provide for an orderly sale of the automotive business assets and all other assets and business units under Section 363 of the Bankruptcy Code and enable the Company to maximize the value of its assets for its stakeholders in a controlled, court- supervised environment. In conjunction with the proposed transaction, A123 has received a commitment from Johnson Controls for $72.5 million in “debtor in possession” financing to support the Company’s continued operations during the pendency of the sale process. The Company has filed a number of customary motions seeking court authorization to continue to support its business operations during the transaction process, including the continued payment of employee wages, salaries and health benefits without interruption. “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,” said David Vieau, Chief Executive Officer of A123. “We determined not to move forward with the previously announced Wanxiang agreement as a result of unanticipated and significant challenges to its completion. Since disclosing the Wanxiang agreement, we have simultaneously been evaluating contingencies, and we are pleased that Johnson Controls recognizes the inherent value of our automotive technology and automotive business assets. We are also pleased that we have received indications of interest that recognize the value of our grid and commercial businesses. We are encouraged by the significant interest we have received, as multiple parties have submitted proposals for these businesses. As we move through this transaction process, we expect to continue operating and working with customers and suppliers.” “Our interest in A123 Systems is consistent with our long-term growth strategies and overall commitment to the development of the advanced battery industry,” said Alex Molinaroli, president, Johnson Controls Power Solutions. “Requirements for more energy efficient vehicles continue to increase, which is driving automotive manufacturers to pursue new technologies across a broad spectrum of powertrains and associated energy storage solutions. We believe that A123′s automotive capabilities are a good complement to our existing portfolio and will further advance Johnson Controls’ position as a market leader in this industry.” The transaction with Johnson Controls is being completed pursuant to Section 363 of the U.S. Bankruptcy Code and is subject to, among other things, higher or otherwise better offers to purchase any or substantially all assets of the Company, Court approval, antitrust approval, any other such approvals as may be required by law, and other customary conditions. Given these conditions, there can be no assurance that the proposed transaction will be consummated. Additional information is available on A123′s website at www.a123systems.com or by calling A123′s Restructuring Hotline, toll-free in the U.S., at 1-800-224-7654. For calls originating outside the U.S., please dial +1 973-509-3190. Court documents and additional information can be found at a dedicated website administrated by the Company’s Claims Agent, Logan & Company: www.loganandco.com. Latham & Watkins LLP and Richards, Layton & Finger are serving as legal advisors, Lazard is serving as financial advisor, and Alvarez & Marsal is serving as restructuring advisor to A123. About A123 Systems A123 Systems, Inc. (Nasdaq: AONE) is a leading developer and manufacturer of advanced lithium-ion batteries and energy storage systems for transportation, electric grid and commercial applications. The company’s proprietary Nanophosphate® lithium iron phosphate technology is built on novel nanoscale materials initially developed at the Massachusetts Institute of Technology and is designed to deliver high power and energy density, increased safety and extended life. A123 leverages breakthrough technology, high-quality manufacturing and expert systems integration capabilities to deliver innovative solutions that enable customers to bring next-generation products to market. For additional information please visit www.a123systems.com. Safe Harbor Disclosure This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended that are subject to risks, uncertainties and other important factors, including statements with respect to the expected benefits of A123′s proposed asset sale and financing transactions with Johnson Controls, the potential of the transactions and Chapter 11 filing to create value for A123 and its stakeholders, the satisfaction of conditions to closing of the transactions, the anticipated growth of the market for energy efficient vehicles, the expectation that a Chapter 11 filing will enable A123 to sell its automotive and other assets in an orderly manner and maximize value to its stakeholders, and the necessity of bankruptcy court and other approvals, including antitrust and other regulatory approvals, to conduct and complete the transactions and other potential asset sales. Among the factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: failure to obtain required bankruptcy court and other approvals, failure to satisfy the conditions to closing of the transactions, delays in the development of A123′s products, adverse economic conditions in general and adverse economic conditions specifically affecting the markets in which A123 and Johnson Controls operate, and other risks detailed in A123 Systems’ quarterly report on Form 10-Q for the quarter ended June 30, 2012 and other publicly available filings with the Securities and Exchange Commission. All forward-looking statements reflect A123′s expectations only as of the date of this release and should not be relied upon as reflecting A123′s views, expectations or beliefs at any date subsequent to the date of this release.
Source: autoblog.com
A123 Files For Bankruptcy, Johnson Controls To Take Over
The company has received cash infusions from China earlier this summer, and its financial situation has been precarious, to say the least. Political controversies were also part and parcel of the story, as with any green energy project today, and A123 received a $249 million dollar grant from the Obama administration in 2009. A123 supplied battery technology to Fisker and General Motors.
Source: thetruthaboutcars.com
Battery Maker A123 Declares Bankruptcy
Electric vehicle battery maker A123 and its US subsidiaries filed for Chapter 11 bankruptcy protection this morning, it announced. It will sell its automotive business assets to Johnson Controls, another battery producer.
Source: businessinsider.com
A123 Systems Bankruptcy Is an Opportunity for Obama to Stand Up for Clean Energy Investments
In fact, the only taxpayer funds provided to A123 Systems were for domestic manufacturing facilities — plants that have now been purchased by Johnson Controls, a leading company in the advanced automobile sector (Already, journalists are reporting that A123 Systems received $249 million in grants. Actually, the company only took down $129 million in grants for building its manufacturing facilities).
Source: cleantechnica.com
‘Rich Dad, Poor Dad’ Author Filed Bankruptcy
Even though the title is misleading as it looks like only one of his companies is going under, I’ve always thought Kiyosaki is a fraud. This is a guy who went around telling everyone that he made it big in real estate when in fact he wrote a book, “Rich Dad, Poor Dad” that went nowhere until an Amway guy picked it up. The Amway guy then made sure it was a must-read among Amwayers. The book is a financial lesson based on his well-educated father who worked hard but lived paycheck to paycheck (poor Dad) and a “friend’s father,” who dropped out of school at the age of 13 but was an entrepreneur who did well for himself (rich Dad) and taught Kiyosaki a lot of financial/life lessons. The reality is that this book is what made Kiyosaki a bunch of money as all of a sudden sales soared once a lot of Amwayers began buying it up and others became curios as well and bought it. There is no evidence that the Poor Dad ever existed. Kiyosaki has repeatedly refused to reveal the identity of this man and some have done extensive research to find out who this man is. There are other discrepancies in his background as well. I remember watching him on one of these financial news networks back in the early 2000′s and when asked about his net worth, he stated “$50-100 million, depending on the day.” How could your net worth swing that wildly if all you own is real estate and precious metals? Then, a few years later, when asked again, he stated “oh, around $35 million.” If you invested in precious metals and real estate in the early 2000′s, your net worth should not have gone down by the mid-2000′s. Anyway, he may be super-wealthy now and his advice may make sense at times, but I think this guy is a total sleaze and engages in general and repeated douchebaggery.
Source: businessinsider.com