The fall of Obama-backed A123 Systems gave GOP challenger Mitt Romney new ammunition yesterday against the president's clean-energy investments, with the $250 million stimulus gamble becoming emblematic of an unsuccessful promise to create 5 million green jobs.
"A123's bankruptcy is yet another failure for the president's disastrous strategy of gambling away billions of taxpayer dollars on a strategy of government-led growth that simply does not work," said Romney spokeswoman Andrea Saul. "While the president has said he would 'double down' in a second term, Governor Romney will return the federal government's focus to its proper role supporting research and creating an environment where private sector innovation can thrive."
Sens. John Thune (R-S.D.) and Chuck Grassley (R-Iowa) pounced on the taxpayer-funded blunder yesterday. On the Web, video clips of Obama four years ago at a town hall-style debate similar to last night's showed him saying at the time, "If we create a new energy economy, we can create 5 million new jobs — easily — here in the U.S."
Bloomberg Businessweek estimates that $21 billion of federal stimulus spent by the U.S. Department of Energy has meant 28,854 people employed — or more than $727,000 per job. A123 had pledged to create 38,000 U.S. jobs but employs only 977 in the United States.
Waltham-based A123 Systems landed a $249.1 million federal grant to open plants in Michigan, which Obama called a "tremendous milestone" at the time in 2010. The company also received a $5 million loan from the Patrick administration to expand its Bay State operations and create local jobs, about $2.8 million of which is still outstanding. Including funds from the state of Michigan, the company received $390.1 million in taxpayer subsidies.
The maker of electric car batteries sought Chapter 11 bankruptcy protection yesterday and sold off its automotive business for $125 million to Johnson Controls Inc. In federal bankruptcy court filings, A123 lists $460 million in assets and $376 million in debt.
Based on technology developed at the Massachusetts Institute of Technology and founded in 2001, the battery maker was never able to turn a profit and was decimated by a recall of defective batteries that cost the company nearly $52 million.
Analyst Theodore O'Neill of Litchfield Hills Research, who has been predicting A123's demise for some time, said when the Obama administration committed to helping A123, it seemed like a good bet. But as the money began being distributed, it became clearer A123 was headed for trouble.
"Their oversight of this was worse than you'd think," he said.
What's more, top execs continued to rake in raises, the Herald reported yesterday. Robert J. Johnson, vice president of A123's energy solutions group, landed a 20.7 percent pay raise this year from $331,250 to $400,000. And they protected themselves from a potential takeover, with top execs inking eye-popping severance deals in the event the company were to change hands, including a $1.7 million golden parachute for CEO David P. Vieau.
The deals appear to conflict with A123's policy stating: "Compensation should reflect our performance as well as individual performance over the prior fiscal year and over a longer period. In the short term, compensation should reflect the extent to which goals are missed, met or exceeded."
"You'd think that money ought to get clawed back," O'Neill said.
A company spokesman did not return calls and emails yesterday.
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