What's up with the A123 bankruptcy?

A123

Don't believe what you're reading from the people who have been wrong about electric vehicles before, trying to strangle this industry before it gains the momentum it needs.

The mid-October bankruptcy of A123, the advanced battery manufacturer with facilities in Michigan, is not an indication of the weakness of the advanced battery industry, and is not necessarily bad news for Michigan.

Instead, it's a symptom of the widely predicted consolidation of the industry, part of the growing pains that happen whenever any new product comes on the market.

"Though the focus of the A123 Systems bankruptcy has been largely negative, there is a positive side of the story," according to Roland Hwang, transportation program director for the Natural Resources Defense Council, in a comment on the National Journal.

"The same day the bankruptcy was announced, A123 also announced it was selling its automotive business to Johnson Controls, another U.S. company. Therefore, all of the A123 automotive technology, products, customer contracts and its two Michigan factories will stay in the U.S. So while A123 Systems' bankruptcy is a setback to the American advanced battery industry, it is a small setback in the long run, as workers' jobs will be preserved for the near term, and A123's technologies will be further developed by Johnson Controls to power current and future vehicles.

While many used A123's bankruptcy to criticize the federal government's role in helping the company, government policy still has a major role to play in the growth of this industry, according to Phyllis Cuttino, director of the Pew Clean Energy Program.

"For the United States to compete effectively in the rapidly expanding clean energy sector and reduce dependence on foreign oil, we must adopt national policies that will spur private investment in technologies such as plug-in electric vehicles," Cuttino said. 

"In the growing domestic PEV sector, cities, states, utilities, and manufacturers are working together to develop local policies to spur greater adoption of plug-in vehicles and charging infrastructure," she said. 

"But national policies are needed to support the development of local markets and provide incentives for consumers to purchase these vehicles. As with airplanes and semiconductors, federal policy should also lead by example through expanded procurement activities such as adding electric vehicles to the fleet of government cars."

Matthew Stepp, senior policy analyst at the Information Technology and Innovation Foundation, said it's important for the government not to stop investing in battery research. 

"This isn't going to be the last we hear of A123's battery technology," he said. "This is just a step in the process of U.S. battery technologies getting better and better." 

And Dan Leistikow, director of the Energy Department's Office of Public Affairs, said in a blog post that "today's news means that A123's manufacturing facilities and technology will continue to be a vital part of America's advanced battery industry." 

So, bottom line? Twenty-eight of the 30 electric-drive firms that received stimulus funding continue to deliver in their original incarnations, while the other two--including A123--will still have a chance to thrive under new management.