I told you about $250 million stimulus-subsidized battery maker A123 back in March. Recap:
While President Obama was busy lambasting Big Oil tax breaks on Thursday, yet another one of his environmental welfare recipients (the very kind he wants to redistribute oil subsidies to) was teetering on the edge of bankruptcy. Who needs to win the Mega Millions lottery? Start a pie-in-the-sky eco-boondoggle, and a half-billion-dollar jackpot ripe for squandering is all yours!
The Solyndra of the week is A123 Systems, an electric vehicle battery company based in Massachusetts. The firm also has battery plants in Michigan, where former Democratic Gov. Jennifer Granholm once heralded A123 as a federal stimulus “success story.” Former House Speaker Nancy Pelosi visited the company headquarters and hailed it as a “great example of how Recovery Act funding is helping American companies.” In addition to nearly $300 million in Obama Recovery Act funds, Granholm kicked in another $135 million in tax credits and subsidies to bribe the company to keep jobs in her state.
How’s the return on government investment? This green dud will have taxpayers seeing red. A123’s official company motto is “Power. Safety. Life.” But the firm’s reality is “Out of power. Endangering safety. Clinging to life.”
Earlier this week, the company announced a recall of malfunctioning battery packs manufactured in Livonia, Mich. A123 makes the products for Fisker, Chevrolet and BMW electric cars. Consumer Reports flagged the potentially hazardous defect caused by faulty calibration earlier this month. The recall will cost upward of $55 million.
…The Michigan-based Mackinac Center reports that in February, “A123’s Compensation Committee approved a $30,000 raise for (Chief Financial Officer David) Prystash just days after (its primary customer) Fisker Automotive announced the U.S. Energy Department had cut off what was left of its $528.7 million loan it had previously received.”
Prystash’s hike was 8.5 percent, taking his base salary from $350,000 to $380,000. One A123 vice president, Robert Johnson, received a 20.7 percent pay increase that saw his salary grow from $331,250 to $400,000. Another vice president, Jason Forcier, vice president of the automotive solutions group, climbed from a $331,250 base salary to $350,000.
Analyst Paul Chesser of the D.C.-based National Legal and Policy Center raises pointed questions about the timing of the pay raises: “Were their actions intended as greater protection for their executives in the case of a sale or bankruptcy of the company?” Inquiring House GOP investigators looking into the Obama Department of Energy’s big green boondoggles should want to know.
And taxpayers should want to know more about the cozy ties between A123 and the White House and Democratic politicians. A123 Systems CEO David Vieau showered Barack Obama, the Democratic National Committee and key Democrats on Capitol Hill with nearly $17,000 before receiving the stimulus injection. A123 enviro-boodle also flowed to Mass. Sen. John Kerry and Rep. Ed Markey. Betting on “smart grid” cronyism has been a bonanza for the well-connected — and a big, bad bet for taxpayers.
Now, this today from the WSJ:
Massachusetts-based A123 Systems Inc AONE -68.75%, maker of advanced batteries for electric automobiles, has announced it expects to miss payments on some of its debt, and may need to seek bankruptcy protection. The company, like others in its industry, has been a beneficiary of US federal government grants, in this case to the tune of $249m.
From today’s SEC filing (emphasis ours):
On October 16, 2012, the Company expects to be in default under certain of its material debt agreements. The Company does not expect to timely pay the October Interest Payment due today, October 15, 2012, under the 2016 Notes which non-payment will result in a default under the indenture governing the 2016 Notes, $143,750,000 in aggregate principal amount of which are currently outstanding. Similarly, the Company does not intend to timely pay a 6% P&I Payment due today, October 15, 2012, under the 6% Notes, $2,759,118.69 in aggregate principal amount of which are currently outstanding, which non-payment will result in an event of default under the 6% Notes and will permit the holders of the 6% Notes to require them to be redeemed. The failure to pay the October Interest Payment and the 6% P&I Payment will also result in events of default under the Loan Agreement…
Paging Stimulus Sheriff Joe, paging Stimulus Sheriff Joe…oh, never mind.
Update: A123 should be renamed B123 — “B” for bankruptcy…
A123 Systems Inc, a lithium-ion battery maker that received a $249 million grant from the U.S. government, filed for bankruptcy protection on Tuesday.
The advanced car battery industry has been hurt by overcapacity amid weak U.S. demand for electric cars.
A123 had promised to create 38,000 U.S. jobs, including 5,900 at its own plants, in return for the government funding under the 2009 American Recovery and Reinvestment Act’s Electric Drive Vehicle Battery and Component Manufacturing Initiative.
The company received a $465 million lifeline from Chinese auto-parts maker Wanxiang Group Corp earlier this year.