The Obama economy has claimed another victim. This time it’s electric car battery manufacture A123 Systems, which filed for Chapter 11 bankruptcy on October 16 when it defaulted on a $2.8 million debt payment. The Wall Street Journal reports that the company received $250 million in federal grants.
Fortunately, this is unlikely to be another Solyndra. Johnson Controls has stepped in with $72.5 million of debtor-in-possession financing to rescue the company, and is poised to acquire it during the restructuring. And A123 still has nearly half of the grant money.
Nevertheless, the federal government did not make the most prudent of choices with the taxpayers’ hard-earned cash. The WSJ notes:
In the past five years, it has lost $877.7 million, including a loss of $269.0 million through August of this year. Its market capitalization had recently dropped to just $41 million from $1.6 billion at the end of 2009, a few months after its public listing of shares.
These ongoing financial problems, compounded by product recalls and a recent drop in demand from key customers such as Fisker Automotive, drove the company to seek a merger partner. It arranged to sell an 80% stake to Chinese auto parts maker Wanxiang Group Corp., but the transaction cratered due to the bankruptcy.
One cannot resist noting that while the company, a prime beneficiary of the Obama Administration “green jobs for America” initiative, did create employment, over one third of its employees work in, wait for it, China!