On October 12, the lithium-ion battery maker A123 (NASDAQ: AONE) essentially ran the white flag up the pole: filing for Chapter 11 bankruptcy, agreeing to sell its automotive-related assets to Johnson Controls (NYSE: JCI), and fielding bids for its grid-storage business.
This is a big come-down from a company that not long ago had a market capitalization of over $2 billion, and was viewed as a high-flyer in the cleantech sector, having been one of the few VC-backed cleantech companies to achieve an IPO.
Alas, the markets for A123’s batteries — both in electric vehicles and on the electricity grid — didn’t grow as rapidly as many had anticipated. Frankly, that isn’t terribly surprising, given how risk-averse and conservative the automotive and electricity industries are in adopting new technologies. Not to mention, the economics just aren’t there yet, and while battery costs have come down and battery performance has gone up, continuing subsidies on fossil fuels makes the breakeven point challenging.
A few months ago, A123 had announced plans to obtain financing from Wanxiang, a Chinese manufacturer of auto parts, that would have kept A123 afloat (although may have only postponed the inevitable). The proposed deal produced a din of objections that American-funded battery technology shouldn’t end up in foreign (especially Chinese) hands. So, now it won’t, though I’m sure that holders of A123 equity aren’t particularly happy about the consequences.
As noted in this reportage by Forbes, the demise of A123 as a company doesn’t mean the demise of its technology — or of the benefits to American customers from using its technology or American employees in making products based on its technology. This point is no doubt lost on those who bitterly complain about A123 having received U.S. government financial support as yet another bad investment and more evidence that the public sector is lousy at and therefore ill-advised to “picking winners and losers”.
As is often the case, only time will tell. It will be interesting to report in a few years on how much value Johnson Controls will have been able to generate with A123’s technology. And only then can a true reckoning be made of the cost-benefit of U.S. public financial support for this technology.