Bankrupt battery developer A123 Systems has reached the end of the road, but the sale of its auto assets to Johnson Controls could help scale advanced battery development.
WASHINGTON – The numbers didn’t add up for bankrupted battery maker A123 Systems Inc., nor apparently did the lithium ions.
The MIT spinoff based in Waltham, Mass., had been struggling financially for some time. On Tuesday (Oct. 16), company executives pulled the plug on America’s best hope for competing in the advanced battery market. But the sale of A123 assets to Johnson Controls for $125 million may eventually turn out to be the best way to recharge lithium-ion battery development in the U.S. and achieve the scale needed to compete in global markets.
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The “picking winners and losers” crowd will undoubtedly pile on again about the demise of A123 Systems because it received nearly $250 million in federal funding. The fact is battery technology is strategic. We need to invest in it. You can’t do anything without power. If and when the power grid goes down, we’ll need stored power.
That’s why federal funding for A123 and other advanced battery developers is worth the risk.
Johnson Controls apparently agrees. In a statement announcing the bankruptcy and sale of A123’s automotive business assets, the head of Johnson Controls’ Power Solutions unit said: “Our interest in A123 Systems is consistent with our long-term growth strategies and overall commitment to the development of the advanced battery industry.”
Alex Molinaroli added: “Requirements for more energy efficient vehicles continue to increase, which is driving automotive manufacturers to pursue new technologies across a broad spectrum of power trains and associated energy storage solutions. We believe that A123’s automotive capabilities are a good complement to our existing portfolio and will further advance Johnson Controls' position as a market leader in this industry.”
Under terms of the deal, Johnson Control gets A123’s battery manufacturing facilities in Michigan, which were set up with economic stimulus funds. It also gains cathode powder manufacturing assets in China along with A123’s equity interest in a joint battery venture with Shanghai Automotive. Most important, Johnson Controls gets access to A123’s promising “Nanophosphate” lithium iron phosphate battery technology, which it will license back to A123 for non-automotive applications.
The Achilles heel for renewable energy has always been scaling the technology. The demise of A123 comes as bad but not unexpected news. The sale of its auto assets to a global player like Johnson Controls means A123’s battery technology now has a new lease on life.
"The Achilles heel for renewable energy has always been scaling the technology. The demise of A123 comes as bad but not unexpected news."
…And I work hard for my money: This is OUR money that has been lost, not "Government" money~
And the only point to this was electric cars?
Might want to look closer at Johnson - Batteries for autos are only one thing they're involved in. Their Power Solutions business is about $1.3 billion out of $10.6 billion total revenue.
And ultimately, longer battery life for laptops, tablets, and smartphones are a far more widely desired result of Li-on battery research.
Since when is the role of government to *not* do that?
The problem with market based economies is that they are poor at providing things for which a price tag does not exist. Investors expect returns. What if what you are doing doesn't have an immediately quantifiable return? Advanced battery technology may well have substantial value down the road, but what is it worth now? What will make an investor pony up to fund it?
A123 had financial problems because it *couldn't* find such investors.
Think of geovernment investment as seed funding, intended to get a recipient to the point where it might *become* commercially viable and you're closer to the mark. The question then become what areas the government feels important enough to *provide* seed funding, and battery technology is arguably one of them.
(And note the entire infrastructure surrounding this communication had roots in government funding - the DARPA project to create a distributed network capable of routing around failed nodes spawned the Internet we all live on now. Think the Internet would have happened *without* the original DARPA funding?)
But it doesn't make a difference whether it's the government or private investors providing the capital - you're placing a bet, and more often than not, you lose. That's true regardless of who you are.
A123 followed a common path: they tried to make it as an independant, couldn't, declared bankruptcy, and had their assets bought by a bigger player active in areas they focused on, who saw potential value in them. This happens all the time too in various ways. How many startups get bought by bigger outfits wanting to add what the startup did to thier portfolio? The startup may not go bankrupt first, but the net result is the same.
Meanwhile, EETimes is a newe site covering the electronics industry. Reporting on an outfit in the ondustry that got government funding and didn't making it does not constitute endorsement of government funding.
Since when is it the role of the Federal Governemnt to "invest" in technology? As a veteran of the manned space program, I saw real investment made by private companies for whom I worked and "strategic" success achieved by free enterprise. Aa a technical publication, please be objective lay-off promoting soviet-style technology investment.
George, I'm sure you can find the address for A123 so you can send your own money to "invest with them". In my world, the government is not in place to gamble my tax dollars. Last I heard, previous investors are now getting $0.06 per share.
There's a fundamental difficulty there - you're working with power, not information. Processors get more "powerful" by using smaller and smaller amounts of power and real estate to process a bit, but to actually make things move you have to supply the grunt.
It's not clear that A123 execs will leave, much less receive fat severance packages. The company will still have a grid and related businesses, and Johnson Controls said it would license technology back to A123 (assuming JC wins the auction for A123's auto business assets).