Obama-backed battery maker goes bankrupt

President Barack Obama speaks on the economy and job creation at Smith Electric Vehicles in Kansas City, Missouri.

The White House is taking flack from Republicans, yet again, for wasting government money on investments in clean energy. This time it's over an electric car battery company that took government grants and is now bankrupt. Yet, the criteria for success or failure with government investment in technology, it can be argued, are different than those for individual investors.

Seth Fletcher, an editor at Popular Science magazine, explained the thinking behind green tech investment. His book on electric car batteries, called Bottled Lightning, includes a few stories from the trenches about A123, the American electric car battery company that filed for bankruptcy this week. A few years ago, it lost a bid to make lithium ion batteries for GM, who went with an Asian battery maker instead. Fletcher says the reason is simple. "It was just a safer bet," he says. "You know the big players in Japan and Korea, they have a 20- or 30-year head start, and they got that head start with government support."

He says Asian governments are heavily invested in electric car battery companies, but a lot of that technology was invented in America. "We ceded the advantage that we perhaps could have had there," Fletcher says. By putting billions of stimulus money into green tech, the White House has aimed to gain back some of that ground.

Sam Jaffe at IDC Energy Insights says that's mostly worked. Even though A123 got hundreds of millions in government grants and then went bankrupt, the company has still contributed to the American economy as a whole. "It created jobs, and a new technology was enhanced," says Jaffe. Plus, he says, A123 already has a new owner, Johnson Controls. It will keep making batteries in A123's factory. Hardly, Jaffe says, a waste of government money.

About the author

Eve Troeh is News Director at WWNO-FM in New Orleans, La., helping build the first public radio news department in the station’s 40-year history. She reported for the Marketplace Sustainability Desk from 2010 to 2013.

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