A U.S. battery maker that was the receipt of several hundred million dollars in stimulus-backed funds could soon be under the control of a Chinese auto parts company. This could become a political liability for the Obama administration.
Yesterday, A123 Systems announced that it had signed a non-binding memorandum of understanding with China’s Wanxiang Group for a US$450 million investment in return for an 80 percent stake in the company, which U.S. taxpayers helped to finance.
A123 received a $249.1 million grant from the Department of Energy to build its battery concept shorter after its IPO in 2009, but commercial success has remained elusive. This past year wrought multiple recall programs, poor sales, and an investor class action lawsuit. It is now veering toward bankruptcy.
Yesterday, the company reported an $82.9 million net loss in its shareholder filings and disclosed that it anticipated major cash flow problems. Q2 revenues fall 53 percent over the last quarter. The company lost $55.4 million in Q2 last year.
The bankruptcy of Solyndra, a manufacturer of thin-film solar panels, rapidly became a focal point for political opposition. I’ve previously referred to A123 as Solyndra 2.0, and expect that its ‘failure’ will inspire harsh criticism of the Stimulus program.
Green jobs remain a centerpiece of President Obama’s economic agenda, so it’s unsurprising that Congressional Republicans, including standard-bearer Mitt Romney, uniformly oppose renewable energy subsidies. The renewables category has effectively been politicized, and some policy experts say Solyndra’s failure places future energy investment at risk.
Last week, Mitt Romney called for an end to renewable energy tax credits, which are generally associated with President Obama. Ironically, the tax credits Mr. Romney now opposes were established during the George H. Bush administration. A123’s potential future as a Chinese subsidiary adds some validity to that position.
It is important to note that A123’s DOE grant will not turn up in a bank in China. “Federal funds can only be used for building factories in North America and the creation of jobs, and that’s what’s been done,” CEO David Vieau told Bloomberg.
Regardless of that restriction, this is especially harsh election year, and there are many videos on YouTube of Present Obama and Nancy Pelosi standing in front of A123 Systems’ plants. It’s a safe bet that a Chinese company acquiring a controlling interest in a Stimulus recipient could become fodder for an attack ad.
(Image credit: Library of Congress)
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