Friday, June 19, 2015
Company that got millions from U.S. taxpayers now profits Chinese owners
The good news is electric car battery maker A123 Systems is finally on track to turn a profit.
The bad news is taxpayers don’t figure to see any of the $133 million the federal government spent and the estimated $141 million in tax credits and subsidies secured from Michigan to help the company take off in 2009, only to see A123 Systems crash, declare bankruptcy in 2012 and then get purchased by a privately held Chinese conglomerate.
“In the case of A123, they created some jobs and a year or two later those jobs were gone, so taxpayers weren’t getting that money back,” said Jarret Skorup, a policy analyst at Michigan’s Mackinac Center, a free-market think tank .
Earlier this month, CEO Jason Forcier announced that A123 Systems’ parent company, the China-based Wanxiang Group, will spend $200 million to double the capacity of three lithium-ion battery plants, including two in suburban Detroit.
Forcier told Crain’s Detroit Business that A123 Systems is expected to generate $300 million in revenue this year and plans to double that amount by 2018. The company, Forcier said, will turn a profit for the first time in its history in 2015.
“The strength of A123 has never been greater and we are honored to be expanding our existing customer relationships and establishing new ones at the same time,” Forcier said in a company news release.
It would mark a dramatic turnaround for the company that was on the verge of collapse when Wanxiang bought it a little more than two years ago at a stripped-down price of $256.6 million.
But finding out if taxpayers will ever see any of their money back is another matter.
Watchdog.org sent an email and left two voicemail messages with A123 Systems, asking whether any refunds are coming or if — under the terms of the bankruptcy — Wanxiang is under no financial obligation to do so.
The one-sentence response from Paulette Spagnuolo, A123’s marketing and communications manager: “A123 continues to meet and exceed all of the terms of the state and federal grants including all job creation, repayment and investment requirements.”
Spagnuolo did not respond to inquiries asking her to elaborate.
Skorup says the money is gone for good.
“There are a lot of local and state rebates and they are largely upfront costs, so yes, taxpayers are sunk on those,” Skorup told Watchdog.org in a telephone interview. “They’re not going to be getting money back from them … Michigan doesn’t require (A123 Systems) to pay them back anyway.”
How much money?
On the federal level, A123 Systems was originally slated to receive $249 million in grants from the U.S. Department of Energy in 2009 to build production facilities in the towns of Romulus and Livonia, Michigan — just $7.6 million less than Wanxiang eventually bought the entire company for four years later.
But A123 Systems ran into trouble early on. After some of its batteries were involved in a recall for the company’s biggest customer, the electric car company Fisker Automotive, the company’s federal grant was cut off after A123 received $133 million.
Figuring out how much Michigan passed out has been more difficult.
The Detroit Free Press and the Mackinac Center have been rebuffed in attempts to see how much of an investment the state made in A123 Systems because the Michigan Economic Development Corporation will not disclose specifics.
Skorup estimates Michigan approved A123 Systems for $100 million in a tax credit program and another $41 million in subsidies.
“How much they actually cashed in those we don’t know,” Skorup said. “We’ve tried to find out, but the state won’t give it to us … they say it’s a private contract.”
The federal money was part of the stimulus package and a green-tech initiative the Obama administration touted would spur economic success.
A123 Systems was one of a number of Michigan battery companies that received a surge of tax credits from the state in 2009, but the incentives did not spur the jobs and dollars that were promised.
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