Connecting Some Dots On A Slow Saturday Morning; A123 Becomes B456 -- Owned By The Chinese

Back on November 17, 2013, I wrote a long "whining" post on the most recent edition of Bloomberg Businessweek.

The opportunity "forced" me to actually look at the "special issue" much more closely than I otherwise might have looked. The blog has served me very, very well .... 

Here are some dots to connect, to think about.

From the Bloomberg Businessweek special edition, the lead-off story, with what to watch for in 2014. The two-page "headline" spread, which I complained about, may have been more helpful than I realized. It included five head shots of the movers and shakers for 2014. I recognized all but one. The one I did not recognize was of Chinese Premier Li. The caption was simply "LI." I thought it was the page number in Roman numbers, page 51.

Then this article linked over at Drudge: taxpayers lose $139 million on Fisker.  

Happy Thanksgiving from the Obama administration. The Energy Department has sold off its $192 million loan guarantee to Fisker Automotive to Chinese billionaire Richard Li for $25 million — the biggest taxpayer loss on a green loan since the failure of Solyndra.

The Energy Department will announce the "selling of the promissory note” to Hybrid Tech, which is owned by Chinese billionaire Richard Li, according to sources familiar with the sale. The DOE sold the loan to Li for $25 million after lending the financially troubled green automaker a total of $192 million since 2009.

But in this case, the dots probably don't connect. I am not aware that Chinese Premier Li and Mr Richard are related.

Except for the fact that they are Chinese. 

So, although the dots don't connect as well as I would like, the exercise revealed there are some new movers and shakers to watch going into 2014.

According to an undated post: 

Hybrid Tech Holdings is new investor group that was formed on October 29 in Delaware. There's no available info on the company at the time of writing and it is unknown whether or not Hybrid Tech plans to restart Fisker Karma production.

The Chinese are getting deep into American battery technology. From the Daily Caller article linked above:

It was reported last month that Li and the Obama administration were ironing out the details of the Fisker loan sale after the Energy Department had completed its auction. Li’s purchase of the government’s loan represents the second acquisition of an Obama-backed green energy company by Chinese investors. Earlier this year, the Chinese auto parts conglomerate Wanxiang Group bought the electric car battery maker A123 Systems, renaming the company B456.

Toyota Pulls The Plug on the All-Electric Car; Admits To Having Misread the Market: EVs Do Not Meet Society's Needs (Cost, Charging Time, Distance)

Link here to the Reuters story:

Toyota Motor Corp has scrapped plans for widespread sales of a new all-electric minicar, saying it had misread the market and the ability of still-emerging battery technology to meet consumer demands. 

Toyota, which had already taken a more conservative view of the market for battery-powered cars than rivals General Motors Co and Nissan Motor Co, said it would only sell about 100 battery-powered eQ vehicles in the United States and Japan in an extremely limited release. [That's an understatement.]

The automaker had announced plans to sell several thousand of the vehicles per year when it unveiled the eQ as an pure-electric variant of its iQ minicar in 2010. 

"Two years later, there are many difficulties," Takeshi Uchiyamada, Toyota's vice chairman and the engineer who oversees vehicle development, told reporters on Monday. 

By dropping plans for a second electric vehicle in its line-up, Toyota cast more doubt on an alternative to the combustion engine that has been both lauded for its oil-saving potential and criticized for its heavy reliance on government subsidies in key markets like the United States. 

"The current capabilities of electric vehicles do not meet society's needs, whether it may be the distance the cars can run, or the costs, or how it takes a long time to charge," said, Uchiyamada, who spearheaded Toyota's development of the Prius hybrid in the 1990s.

This is a huge story on so many levels.

Let's see what A123 is doing this morning: down 10% (drops another 3 cents to 30 cents/share). Down to 30 cents/share. Remember: this sold for $25/share at one time. [A123 is now B456.]

I could be wrong, but I believe Toyota was A123's most important customer. I have more than a passing interest in A123 but cannot comment further. I do not invest or trade in A123.

This should be great news for Government Motors: one less competitor. All indications are that GM will continue to develop, market, and ship its all-electric vehicle, the Volt --- once it re-opens the assembly line.

Related:

First:

Tesla's outlook dims. CEO sidesteps question --
“People that are buying this vehicle now are supporters of the company, so to some extent whether the volume is 5,000 or 4,000 or even 3,000 this year, it doesn’t really matter,” Baum said yesterday. “In the longer term, it’s more important that the product be thought of positively. The last thing the company needs is to disappoint buyers. They haven’t yet and they don’t intend to.” ["It really doesn't matter! Let the venture capitalists eat cake.]

Second:

Tax credits will have no impact on sales of electric vehicles; a waste of money. Some crackpot? Nope, the Congressional Budget Office.  

Absolutely Nothing To Do With The Bakken -- A123 Batteries -- A Mystery -- For the Bakken, Skip and Scroll

Updates

November 23, 2013: A123 is now B456, owned by the Chinese. 

Original Post

This story was on CBS Nightly News tonight -- Don alerted me to the story.

The story has to do with A123 -- a battery company located just "down the street" from where I'm staying. I've followed this story / this company for a very long time for many, many reasons.

For two earlier updates regarding A123, click here and here.

There are so many story lines, but the best I will save for last.

Story lines:

• It shows just how challenging this battery "stuff" really is. No breakthroughs despite many companies and many billions spent. Steve Jobs of Apple Corp (the computer company) once said his biggest challenge for the company was a better battery. (There is a company in Belmont, MA, that is working on a new battery; they may be closer to a breakthrough.)
• This is yet another company that received millions in stimulus money from the administration and has nothing to show for it.
• I had read the company's press release a couple weeks ago about a new battery. I did not know what to make of the announcement. According to the linked CBS story: "many analysts seemed underwhelmed."
• A123 is a battery company, so in light of the battery breakthrough announcement, this last paragraph in the story is very strange:

A123 isn't giving up. It still has more than 100 million federal stimulus tax dollars left to spend. Recently the company said it will hire 400 people -- not to build batteries for electric cars, but for power grids.

If the breakthrough was that big a deal, why wouldn't they be using the 100 million federal stimulus tax dollars and 400 new employees to press forward on this new technology?

That is a huge  story. In fact, some folks might think that is the big story, that the company, despite a breakthrough in battery technology, is moving into a new endeavor: "power grids."

Nope, this is the bigger story, and it starts earlier in the linked article:

The road wasn't always so bumpy. When President Obama announced 90-billion stimulus tax dollars for green energy, A123 stepped up for a slice of the pie. It spent $1 million lobbying Congress and federal agencies, and won 249 million in stimulus dollars.

When an A123 plant opened in Michigan in 2010, the company even got a call from President Obama. "I'm calling to congratulate A123 Systems on this tremendous milestone," he said.
 ....

Herrera was among 1,000 workers who landed jobs at A123.

But one month after that interview, A123 laid off 125 employees.

Then the luxury electric car Fisker Karma failed. It was powered by a faulty A123 battery. "It's low, it's sleek, it's sensuous... it's also broken! " said Consumer Reports.

Electric vehicles fall drastically short of Obama's 1 million goal

All of that was in the CBS transcript including that last link. 

[Note: CBS did not note that Fisker was a recipient of federal stimulus money also; if I remember correctly, the Fisker was going to be built overseas. But I digress.]

Finally: here's the big story -- CBS Nightly New has very limited time to present the news; the producer must be very, very selective in what he/she decides to air. The question is, and the big story is, why would CBS, a huge supporter of the president and liberal causes, air a story on another administration failure jut months before the election? In the big scheme of things, it's a pretty uninteresting story for the average viewer.  I cannot, for the life of me, figure out why CBS would air this story.

Obama's Team of Five: $3.9 Billion to 21 Energy Companies -- Another Solar Company Files For Bankruptcy -- Energy Conversion Devices

Updates

November 16, 2012: A123 received almost $1 million (auto-pilot disbursement) on very day it filed for bankruptcy.

The Obama administration provided struggling battery maker A123 Systems Inc with nearly $1 million on the day it filed for bankruptcy, the company told lawmakers investigating its government grant.

The company, which makes lithium ion batteries for electric cars, filed for Chapter 11 bankruptcy protection last month after a rescue deal with Chinese auto parts supplier Wanxiang Group fell apart.

That same day, October 16, A123 received a $946,830 payment as part of its $249 million clean energy grant from the Energy Department, ...

I guess it's the principle of the thing. $1 million / $249 million  --> 0.4 percent. Also, one million dollars is about as much as it costs for the Obamas to go to Paris for the weekend. In other words: it is so inconsequential, it does not matter. Posted for archival purposes only.

October 16, 2012: A123 declares bankruptcy; automobile business assets bought by Johnson Controls.

August 9, 2012: A123's angel? China.

Early in 2012 President Barack Obama responded to critics of his multi-billion-dollar green technology initiative by saying he was "not going to cede the wind or the solar or the battery industry to China."

Six months later, he faces that very real possibility for the U.S. car battery industry, a once-high flying sector buttressed by generous federal grants, but struggling with a green car market that has fallen far short of expectations.

A123 Systems Inc on Wednesday became the second U.S. government-backed battery maker this year to go overseas for a lifeline - and it turned to China. Auto parts supplier Wanxiang Group will take a controlling interest and invest $450 million in the Massachusetts-based battery maker, which faced running out of cash by the year-end.

Earlier this year, Ener1 Inc, another battery maker that received a government green technology grant, emerged from Chapter 11 bankruptcy under the control of Russian investor Boris Zingarevich. New York-based Ener1 is also a joint-venture partner in China with a Wanxiang subsidiary.

June 17, 2012: CBS Nightly News had this story on A123. 

A123 has declined further interview requests. As for that battery breakthrough announced this week, many analysts seemed underwhelmed.

"These new technologies that are introduced have to be vetted over a number of years before they actually find their way into products," said Theodore O'Neill of Wunderlich Securities. "So the product itself is interesting, but doesn't do anything to solve the financial problems that A123 has."

A123 isn't giving up. It still has more than 100 million federal stimulus tax dollars left to spend. Recently the company said it will hire 400 people -- not to build batteries for electric cars, but for power grids.

February 24, 2012: another "green company" in financial trouble; $400 million in stimulus money; lays off 125; increases pay for top executives; this time it's A123 in Boston, a battery company, the company's primary customer, Fisker Automotive, is also struggling financially;

February 17, 2012: Democratic National Convention co-chair received $230 million in "green stimulus" money.

February 15, 2012: Venture capitalists on Obama's team explains the solar debacle. 

Sanjay Wagle was a venture capitalist and Barack Obama fundraiser in 2008, rallying support through a group he headed known as Clean Tech for Obama.

Shortly after Obama’s election, he left his California firm to join the Energy Department, just as the administration embarked on a massive program to stimulate the economy with federal investments in clean-technology firms.

Following an enduring Washington tradition, Wagle shifted from the private sector, where his firm hoped to profit from federal investments, to an insider’s seat in the administration’s $80 billion clean-energy investment program.

He was one of several players in venture capital, which was providing financial backing to start-up clean-tech companies, who moved into the Energy Department at a time when the agency was seeking outside expertise in the field. At the same time, their industry had a huge stake in decisions about which companies would receive government loans, grants and support.

During the next three years, the department provided $2.4 billion in public funding to clean-energy companies in which Wagle’s former firm, Vantage Point Venture Partners, had invested, a Washington Post analysis found. Overall, the Post found that $3.9 billion in federal grants and financing flowed to 21 companies backed by firms with connections to five Obama administration staffers and advisers.

Original Post

Link here to Reuters article.

Lightweight solar product maker Energy Conversion Devices Inc filed for bankruptcy protection on Tuesday, the latest in a string of solar companies that have collapsed in an industry shakeout.

The company, whose filing follows years of losses and months of public discussions with bondholders, said it would sell its United Solar Ovonic unit and other assets in bankruptcy.

Energy Conversion, whose solar laminate products are used for panels on rooftops and buildings, said it would continue to operate during the sale process.

Energy Conversion's failure is the fourth major bankruptcy in the industry in the past year. Evergreen Solar Inc, Solyndra and SpectraWatt have also sought Chapter 11 protection.

The dots are starting to connect. A long laundry list of solar energy companies were given loans, grants, tax breaks, etc., by the federal government all about the same time. They all had a similar business plan, and right on cue, they all foundered about the same time, about the time the taxpayer money ran out.

My hunch is that if the current president is re-elected, these companies will get a new lease on life, and the process will start anew.

It should be noted that bankruptcy does not occur overnight. Although the bankruptcies come when natural gas prices are in free fall, these solar companies couldn't even make it when natural gas prices were (a bit) higher and when these solar companies had the venture capital and tax breaks on their side.