A123 Systems Proves a Dead Battery, Files for Bankruptcy

Earlier today, the battery maker firm A123 Systems, regarded as a potential source for new battery technology in general and the potential for improvements in electric cars, filed for Chapter 11 bankruptcy protection on Tuesday. This by itself might not mean so much, but considering that A123 Systems took a $249 million grant from the United States government down into the hole with it, it's giving Republicans fresh ammunition going into election season.

A123 Systems had been working on a rescue deal valued at $465 million with the Wanxiang Group, a Chinese auto parts supplier, that would have allowed it to keep operating. But the deal fell through at the last moment, owing to what A123 Systems called "unanticipated and significant challenges." A123 Systems has already established deals to sell off its various automotive operations, including the sale of two Michigan factories to Johnson Controls Inc., which bought the plants for $125 million. Interestingly, Johnson Controls is not only itself a recipient of government subsidies geared toward promoting green initiatives, but it is also a major producer of batteries and battery technology.

One of A123 Systems' primary clients was Fisker Automotive, creators of the Karma hybrid; supplying Fisker with batteries represented just over a quarter--26 percent--of A123 Systems' revenues for 2011. Additionally, they also supplied batteries for the upcoming Chevrolet Spark EV, set to emerge next year from General Motors (News - Alert), itself the beneficiary of recent government spending.

At last report, the United States government had handed out nearly $90 billion in such subsidies through a larger stimulus package. However, of that $90 billion, nearly a full tenth of it--$813 million--went to companies that filed for bankruptcy like Abound Solar, A123 Systems and Solyndra Systems. This in turn has led to more than a few suggesting that the government really shouldn't be engaging in practices like this, attempting to "pick winners and losers" when it comes to corporate matters.

Regardless of the overall stance on government handouts, it's quite plain that better battery technology is an important concept. Giving regular people access to improved energy storage is the kind of thing that would make serious and significant changes in the way we live, work and play. A single lightning strike, it's been suggested, would be sufficient to power a fairly large city for some time, if there were a way to safely and easily store that incredible energy discharge.

But is massive government spending the way to get there? While that will likely prove to be the hot button issue for some time to come--especially in the upcoming Presidential debates--the fact remains that another potential developer of that new technology is lost, and a large amount of taxpayer funding with it.