1… 2… 3…. FLUSH!
Almost 400 million more in federal and state subsidies down the hopper.
 
A123 Systems, a Massachusetts-based manufacturer of lithium-ion batteries and energy storage systems, looks to be the next green tech business to tank. The company, which also has locations in Michigan and Missouri as well as in Germany, China and Korea, and employs more than 2,000 people worldwide, will likely need more corporate welfare if it’s going to survive.
 
Touted by the previous MI administration (Granholm) as a “Recovery Act success story,” A123 was optimistically predicted to eventually create 3000 new jobs. In the past nine months, after receiving $390 million in federal and state subsidies, the company has laid off 125 employees and had a net loss of $172 million through the first three quarters of 2011. Sounds more like a “fail story” to me.
 
It was bound to happen. Forbes analyzed the numbers, and reported on the company’s outlook back in November. Their conclusion:

As stated above A123, has received substantial funding from government grants in order to provide liquidity for expansion and to generate future revenue. Should AONE [Nasdaq] continue to rely on government related grants in order to maintain adequate liquidity, this could lead to major problems down the road in relation to the company’s ability to continue operations. Should government grants, for whatever reason, be discontinued, A123 will need to solely rely on capital markets in the form of equity or debt to survive – a dangerous proposition considering the company’s inability to execute a healthy/effective business plan.
 
Making matters worse, the company’s revenue comes from a limited number of sources. This is an area of concern, as an immature company can be substantially affected by a loss of a single customer.
 
A123 receives a rating of Poor. While A123 is a young company, they are having trouble developing a sustainable financial position. Thus far, all growth and “success” of the company can be attributed to management’s ability to access capital funds from the government and capital markets.

 
In the meantime, A123’s top execs are making sure they get theirs. As Michigan Capitol Confidential reports, just this month ~

… A123’s Compensation Committee approved a $30,000 raise for CFO David Prystash just days after Fisker Automotive (the company that was to be the main purchaser of its batteries) announced the U.S. Energy Department had cut off what was left of its $528.7 million loan it had previously received.
 
Prystash wasn’t the only executive to see a big raise this month. Robert Johnson, vice president of the energy solutions group, got a 20.7 percent pay increase going from $331,250 to $400,000, while Jason Forcier, vice president of the automotive solutions group, saw his pay increase from $331,250 to $350,000. Prystash’s raise was 8.5 percent, going from $350,000 to $380,000…
 
… “It looks highly suspicious,” said Paul Chesser, associate fellow for the National Legal & Policy Center. “It looks like they are trying to pad their top people’s wallets in case something really bad happens.”

 
Hey, what are you gonna do? You’re laying off employees, the company’s tanking… give yourself a raise! These guys would make great politicians.
 
Speaking of which, last summer Michigan Senator Debbie Stabenow was still pushing for $2 billion more public funds to flush down the battery research black hole. From Doug Powers at Michelle Malkin’s blog:

Great idea! If taxpayers pump money in faster than supported companies lose it, they’ll be able to avoid layoffs, hire extra workers, and Granholm, Stabenow and the Obama administration can declare the project a rousing success — again. That way it doesn’t matter if there’s actual consumer demand for the product. It’s econ-101.

 
This is yet another reason to retire our magnanimous Senator this fall, in favor of Clark Durant. Michelle Malkin agrees.