Battery maker A123 files for bankruptcy protection

Associated Press Modified: October 16, 2012 at 6:16 pm •  Published: October 16, 2012

DETROIT (AP) — After years of struggling in the nascent market for electric cars, battery maker A123 Systems Inc. filed for bankruptcy protection Tuesday.

The filing drew criticism from Republicans who claim the Obama administration has wasted millions of taxpayer dollars on alternative energy companies like A123.

The company received a $249 million Department of Energy grant three years ago with high hopes that it would help foster a U.S. battery industry. At the time, the country was far behind the world leaders, Korea and China.

But the technology offered by the Waltham, Mass.-based A123 Systems turned out to be ahead of its time. Americans continue to shun costly electric cars in favor of gas-powered ones.

"Sometimes when you push the edge of technology, you fall over that edge," said Aaron Bragman, an automotive industry analyst at IHS Automotive near Detroit.

The filing doesn't necessarily mean the end for A123 System's operations. The company sold its automotive unit to parts maker Johnson Controls Inc., which plans to keep A123 plants open and sell the company's lithium-ion battery technology.

But the bankruptcy filing stoked Republican criticism of Obama's support for "green" energy companies, which have received millions in grants and loans. Almost instantly, A123 became an issue in the presidential campaign.

The 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," Andrea Saul, spokeswoman for Republican challenger Mitt Romney, wrote in an e-mail.

Obama's campaign countered, saying the investments have more than doubled renewable energy production from wind and solar sources, creating jobs and bringing manufacturing back to the country. The administration has said the "vast majority" of companies that received loans are still expected to pay them back in full, with interest.

A123 joins solar panel maker Solyndra LLC as another example of companies that got government money but failed. The politically connected and now bankrupt Solyndra left taxpayers on the hook for $528 million after it failed to repay a government loan.

The government also made millions in loans to electric car makers Tesla Motors and Fisker Automotive, both of which are struggling. Tesla has never made a profit but is starting to repay its loans, while Fisker is trying to raise money so it can build a car that's less expensive than its $100,000 Karma.

Bragman said that although the government will lose cash, its seed money was needed to foster the electric car and battery industries. Other governments such as Japan and China, he said, play similar roles in growing new industries.

"You run the risk of losing some, but you run an even bigger risk of falling behind globally if you're not ready when the technology suddenly blossoms, which it will," he said.

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