A123 Systems saves taxpayers $119 million thanks to Obama Administration
President Obama has been very clear in his presidency that renewable energy is a critical part in his solution to creating jobs, lowering energy costs, and waging a “green” energy war on the oil and coal industries. To that end there were several steps that needed to be taken: government control of the auto industry; taxpayer investment in renewable energy companies; and an economy that recovered from the financial collapse he was elected to resolve.
The auto industry was the first target to be addressed. With the leadership of the Democrat-led Congress, the Troubled Asset Relief Program (TARP) was created and initially excluded the auto industry. This led to the collapse of GM and Chrysler, both of which were then taken over by the government as industries “too big to fail”.
“…the Treasury has recouped roughly $31 billion of the $61 billion invested in the two companies through repurchases of debt and preferred stock, as well as the sale of common stock; the Treasury has also written off or realized $7 billion in losses on its investments in GM and Chrysler.” – Congressional Budget Office (CBO) Oct. 11, 2012 report
The real success of the ownership of GM and Chrysler came in what it allowed the Obama Administration to do. As the largest shareholder the mission placed primarily before GM was the emphasis of sales of electric vehicles – focused on the Chevy Volt. This was part of the Obama Administration goal of placing 1 million electric vehicles on the road by 2015. A target that, according to Pikes Research, will be missed (forecasted to be reached by 2018). Further, car makers are tracking to government mandates as consumer interest remains tepid at best.
The current estimate is that 47,966 plug-in electric vehicles will be sold in 2012, out of the 10,899,949 total vehicles sold in the U.S. in the first 230 days of the year. This government mandate driven market has created a dubious corporate environment.
“Startup PEV [plug-in electric vehicle] companies, many venture-backed, will face a difficult time meeting announced production numbers. That has been the case for the past few years, a time when several prominent startups have gone out of business or fallen in and out of bankruptcy.” – Pikes Research, EXECUTIVE SUMMARY: Plug-in Electric Vehicles – 2nd Quarter 2012
Moving forward, the economy has slowed with GDP growth of 1.3% in the 2nd Quarter of 2012. Unemployment, while officially at 7.9%, unofficially totals 22.7 million Americans. 11.92% of homeowners with mortgages were in default as of August. Finally, the U.S. debt currently exceeds $16 trillion, and there has not been a budget since President Obama was elected.
Thus far, the question might be where are the taxpayers saving money? The answer is the second set that was addressed in the opening of this article, and discussed by Pikes Research report. Investments made by the Obama Administration with taxpayer funds.
While the investments in Chrysler and GM have been losses that are never expected to return a break-even, the Obama Administration also spent $34 billion on 27,226 renewable energy grants from the 2009 Stimulus – not the $90 billion quoted by Mitt Romney during the first Presidential debate. Within that figure are 33 renewable energy companies. According to the Heritage Foundation on July 24, 2012, twelve of those companies are bankrupt. That figure has now risen to 13.
Many of these companies have failed after receiving hundreds of millions of taxpayer dollars. But sometimes these companies fail fast enough that all of the money that the Government targeted to them is not paid. That is the case with the bankruptcy of A123 Systems.
A123 Systems is an electric car battery manufacturer. They were a Massachusetts-based company, touted at the Rose Garden of the White House on April 2010 by President Obama for creating 2000 jobs and predicted as the world leader in lithium-ion batteries for cars. They were to receive $249 million from the Obama Administration, and $125 million from the State of Michigan, to develop this new industry.
But then the real world stepped in and interfered with the “green” dream. A123 lost out on the Chevy Volt contract to a South Korea company. The Fisker Karma failed to gain traction with consumers and had delays. As mentioned above, electric car sales have lagged, even with government mandates and the best wishes of the Obama Administration.
Thus A123 Systems is now bankrupt. But in doing so, they failed to receive $119 million in additional government funding. According to the White House math, as with funding for Iraq and Afghanistan wars and Medicare funding, money not spent is money that counts as saved – even though the funds will still be borrowed and reallocated to a different government program.
A123 Systems is a win-win scenario in that is allows the Obama Administration the means to tout how it saved money in supporting “green” energy (omitting that the savings is due to 13 companies now being bankrupt and therefore unable to receive full funds allocated), and provides a slush fund for new spending on other programs – as the borrowed money will not be used to repay the national debt they added to (similar to plans for the TARP repayment).
Like Solyndra, Beacon Power, and the Chevy Volt, the Obama Administration has once again proven that government lacks the ability to predict winners and losers in any industry. Once again taxpayer funds have been applied, and lost, in an attempt to fulfill a dream of “green” energy that does not exist. Yet again the national debt has been added to, not reduced, without a benefit to show for it.
The Obama Administration – via A123 Systems – saved $119 million dollars today and all it cost was 2000 jobs, $130 million in “green” energy funding, and the diminishing of hope for a new industry in America. You can decide if it was worth it.
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October 16th, 2012 at 6:21 pm
Comment as found on Facebook
Lisa Mulvehill
So if no “alternative energy” sources exist, are you suggesting that the human race should continue it’s mass consumption of finite fossil fuels until they are completely depleted and then simply return to the Stone Age? Better to give up than to try? That goes against human nature. Pretty cynical, even for you.
October 16th, 2012 at 6:22 pm
Lisa,
NO, I did not say that at all. I am saying that the government mandating a strategy to reach the goal of alternative energy is the fastest road to failure. I am saying that these failures are costing money and jobs. I am saying that its better to allow the private sector the freedom to find the answer, and in the meantime yes we need to optimize fossil fuels which are the ONLY reliable source of energy available today.
October 16th, 2012 at 6:22 pm
Further, rather than have the government mandate electric cars that cost too much and are unwanted, we should motivate companies to make cars that are electric that people want and can afford. Why does the Prius sell better than the Volt? Better car, better price. Which is mandated? Volt. Who loses in this mandate? The American public.
October 16th, 2012 at 6:40 pm
Comment as found on Facebook
Lisa Mulvehill
The numerous problems with American car companies extends far beyond the current administration’s policies and it is short sighted to blame the sad state of our nation on Obama. Why not lay blame where it belongs? At the feet of greedy Americans who put profit for the few over the prosperity and success of our country at large.
October 16th, 2012 at 6:40 pm
I place blame at the top, with whatever President is in office – especially if they have promised and provided legislation that is supposed to improve the nation and it does not. Yes the issues with car companies is long-term, and when given the chance to correct those problems, President Obama chose instead to create mandates. He is accountable.
As for greed, well that created the nation we live in today it can be argued. The rail systems, most of our libraries and colleges, created by greed. Improvements in science and technology – also greed based. Unless people think that Apple makes the Iphone for free. At the same time, the numbers of those that live off entitlements, and I mean those abusing the system, is growing – and that is unsustainable. Nations grow, as does prosperity, out of effort, motivation and yes a degree of greed. But that was not the point of my article.