Let's take one more look at government's investment in A123, green energy, electric cars and the like.
Electric Car Crash is subtitled 'Obama's green energy industrial policy turns up in Chapter 11':
"Mitt Romney quipped in the first Presidential debate that the problem
with the Obama Administration's green energy investing isn't that it
tried to pick winners and losers, but that "you pick the losers." He was
being generous. Another big green Administration favorite went belly-up
on Tuesday with the Chapter 11 filing by battery-maker A123 Systems
Massachusetts-based A123 is—or was—part of President Obama's grand
design to build a U.S. electric-car industry more or less from scratch. . . .
As Mr. Obama put it in August 2009, the government would create an
"infrastructure of innovation" by doling out "$2.4 billion in highly
competitive grants to develop the next generation of fuel-efficient cars
and trucks, powered by the next generation of battery technologies, all
made right here in the U.S. of A."
In a September 2010 congratulatory phone call to A123's Livonia,
Michigan plant, Mr. Obama called it "the birth of an entire new industry
Democrats were explicit that this was an attempt to rehabilitate the
idea that government could nurture new industries. As Michigan Senator
Carl Levin said in a 2011 speech, A123's factories "are a forceful
rebuttal to those who argue against public investment in this field,
people who label this 'industrial policy.' In the not too distant past,
that label—'industrial policy'—was the kiss of death for any proposal.
That's an ideological hang-up that we've now overcome."
One not-so-ideological hang-up: The technology and market for such an
industry didn't and still doesn't exist for commercially profitable
levels of production. Electric-battery storage in particular has
bedeviled technologists for decades. But rather than fund basic
research—arguably a role for government—Mr. Obama and his green friends
decided to play venture capitalist and industrial planner. With your
The Bush Administration gave A123 a $6 million research grant in
2007. But the company hit the jackpot in August 2009 when Mr. Obama's
Department of Energy announced a $249 million grant.
No strings attached
and not even a taxpayer equity stake. The cash was supposed to build
three plants in Michigan that would create "more than 3,000 [jobs] by
the end of 2012," according to Mr. Obama.
The A123 batteries needed a market, so the government tried to
finance that too. In April 2010, the Energy Department gave Fisker
Automotive a $529 million loan to develop and produce plug-in hybrid
cars—for which A123 would supply the batteries.
Fisker was supposed to be producing
cars this year at an old General Motors-United Auto Workers plant in
Delaware. Vice President Joe Biden traveled to Delaware himself for the
plant reopening. But Fisker has struggled with reliability issues, car
recalls and management changes. In August, a Fisker Karma vehicle caught
fire in a parking lot in California, thanks to a defective cooling fan.
The Energy Department froze Fisker's credit line last year.
As for A123, it also struggled with quality-control problems and
competition from low-cost producers in Asia. China's Wanxiang Group
offered A123 a lifeline in August, but Tuesday that deal fell apart.
Johnson Controls, the Fortune 500 giant, will now pick up the pieces
and finance A123's bankruptcy. Johnson Controls received a $299.2
million grant from the Obama Administration in 2009 to build advanced
batteries. Johnson Controls is a respected enterprise, but does a
company with a fiscal 2011 net income of $1.6 billion really need
More than any single failure, the larger lesson here is the eternal
one about the folly of government industrial policy. Someday someone
will find a way to store electric power for long periods, and someday
someone may build a commercially viable electric car. We will be the
first to cheer.
But the second to last people in the world to know when that day
arrives will work for the Department of Energy, and the last will be
U.S. Senators. In 2008 President Obama sold voters a fairy tale about
millions of "green jobs" that he could conjure up merely by "investing"
The 2012 election is in part a referendum on whether
Americans can be fooled again."
Honest Abe said that you can fool all of the people some of the time and some of the people all of the time, but you can't fool all of the people all of the time.
We'll soon see how many people will be fooled at election time.
Industrial policy is another name for government officials taking MOM from taxpayers and giving -- er -- "investing" it OPM style in loss generating ventures whose time hasn't come and may not come for another several decades.
That's why private sector MOM based investing stays away from this garbage, and that's also why government never has enough OPM to spend on its favorite "investments."