Print 11 comment(s) - last by JonnyDough.. on Nov 20 at 7:28 AM

  (Source: Bloomberg)
Republican Senators want to know why the Energy Department continues to fund failing companies

A123 Systems is the provider for the battery packs used in several electric and hybrid vehicles on the U.S. market today, including the Fisker Karma. A123 produces lithium-ion batteries and was the recipient of multiple federal grants from the U.S. government.

A123 Systems filed for Chapter 11 bankruptcy protection on October 16 after a deal with a Chinese auto parts company that would have rescued it collapsed.

The same day the company filed for bankruptcy protection, it received a payment of $946,830 from the U.S. government as a part of its $249 million Department of Energy grant for developing clean energy technology.
The grant has an outstanding balance of $115.8 million, and A123 is still eligible for the remainder of its grant funds if it decides to update or expand its manufacturing capacity.
Republican Senators John Thune and Chuck Grassley have been vocal in opposing any federal grant money being giving to A123 and have pressed the Department of Energy to explain why grant money has been continually given to the battery maker even as it has faltered and filed for bankruptcy protection.

A spokesman for the Energy Department, Bill Gibbons, said, "The Energy Department takes its responsibility to be good stewards of the taxpayers' money very seriously."

Source: Reuters

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I don't know
By mchentz on 11/19/2012 10:53:57 AM , Rating: 2
Is the purpose of filing bankruptcy to get out of repaying the government of the loans?

RE: I don't know
By stusanagain on 11/19/2012 12:21:15 PM , Rating: 2
Is the purpose of filing bankruptcy to get out of repaying the government of the loans?
Ummm... sort of. Since this is Chapter 11, not Chapter 7, the company plans on reorganizing and coming out of bankruptcy. They need to forestall payments to their creditors of which the government is (probably) but one of many. Theoretically they could end up paying off all the debt, but perhaps not as much interest or not on the same schedule as was originally agreed.

Will they get out of paying the government back? It depends on how the government acts during the bankruptcy proceedings. The best option for the government (and other creditors) is to get the company back on its feet. Letting the company fall into Chapter 7 would most likely mean the debts would not be paid, or at best only pennies on the dollar.

RE: I don't know
By Savatar on 11/19/2012 12:47:14 PM , Rating: 2
It's a grant. There are absolutely no repayment requirements on federal grants. That is, basically, considered a gift to the company.

RE: I don't know
By theapparition on 11/19/2012 3:53:14 PM , Rating: 2
Grants like this have contingencies.

Let's say I petitioned donors for a grant on studying the reproductive cycle of the fruit bat. Some donors gave me 1 million dollars to to this. It's not a gift, as I must use that money to study fruit bats. I can't just go out and buy a Ferrari and 6000sqft home. There's accountability, and even the potential for criminal charges if there was any deception and misuse of funds.

So I'm curious how this will play out.

RE: I don't know
By Argon18 on 11/19/2012 5:28:22 PM , Rating: 2
Yep, it's purely a gift. And oh look, the CEO of A123 was a big Obama campaign donor. Isn't that a coincidence.

RE: I don't know
By stusanagain on 11/19/2012 6:41:58 PM , Rating: 2
Yeah, I missed the "grant" part. Those would never be repaid, except in cases of malfeasance (which would need to be proved). Malfeasance would depend on the terms of the grant.

Loan guarantees are yet another subject. I believe if any of those were given, the taxpayer is on the hook in Chapter 11 proceedings. *sigh*

Wait a second.
By Yaos on 11/19/2012 11:26:51 AM , Rating: 2
Republicans said that bankruptcy would have been good for the car companies so they could reform, now all of the sudden the republicans say that bankruptcy is bad and means the company will liquidate all assets. Well which is it?

RE: Wait a second.
By 91TTZ on 11/19/2012 11:46:36 AM , Rating: 3
In the automakers' case, when you have a massive pile of debt such as pensions to pay, bankruptcy makes sense since you can get out of paying back all that debt. It also allows you to reform and continue operating as a business.

A123 wasn't trying to continue operating as a company. For a while it's been looking to sell itself to the highest bidder. Basically their executives were looking to dissolve the company, take their money, and run.

RE: Wait a second.
By Savatar on 11/19/2012 12:50:19 PM , Rating: 3
The deal was that (most) republicans didn't want to 'bail out' companies, and instead wanted them to restructure. This is still an example of a company getting federal money as a hand-out with the taxpayer getting absolutely nothing in return. That's the gist of the issue.

RE: Wait a second.
By boeush on 11/19/2012 5:36:09 PM , Rating: 3
The deal was that (most) republicans didn't want to 'bail out' companies, and instead wanted them to restructure.
That's a laughable myth. Most Republicans as well as most Democrats had no problem bailing out Wall Street, to the tune of $Trillions. In fact, they are still doing that, and they plan on continuing to do that, basically forever or until our entire economy implodes. By comparison, GM and all the other non-finance companies are a miserable little drop in the bucket. There's a lot of important-sounding noise being made in political circles, and a lot of bright shiny objects flashed across infotainment/propaganda channels, but in truth the looting of America continues apace and quite regardless of which "party" is in charge.

Who cares?
By JonnyDough on 11/20/2012 7:28:25 AM , Rating: 2
This company is filing a RESTRUCTURING bankruptcy to hold it over. A LOT of American companies get grants, take out loans, etc, until their research can be sold or turned into profit. So many are operating "in the red" right now it's ridiculous. GM has a contract that will bear fruit with A123 for batteries in 2014, and as such this isn't even news.

"Let's face it, we're not changing the world. We're building a product that helps people buy more crap - and watch porn." -- Seagate CEO Bill Watkins
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