There’s an upside to A123’s bankruptcy

There’s an upside to A123’s bankruptcy

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.

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TAG:A123 Systems Inc Advanced Battery Development Johnson Controls A123 Systems Lithium Ion Bankrupted Energy