Why Washington is Wrong on A123

October 16th, 2012



A123 Prismatic Battery Modules for PHEV and EV Applications via FlickrAmerican advanced battery manufacturer A123 filed for Chapter 11 bankruptcy protection this morning. In Washington, this is going to be spun as yet another failed DOE loan recipient, an example of why the government shouldn’t be picking winners and losers, and a technology that couldn’t succeed without government support. In the business world, though, it’s merely a once-$2 billion company that struggled to overcome an expensive product recall and cash crunch. Companies fail all the time, but it doesn’t mean the technology is a failure.

In fact, Johnson Controls sees a lot of value in A123’s technology and will be acquiring A123’s assets out of bankruptcy. As the largest supplier of lead-acid batteries for cars, the advanced battery technologies “are a good complement to [their] existing portfolio and will further advance Johnson Controls’ position as a market leader in the industry.” The advanced battery market is currently valued at $5 billion and is expected to grow too $50 billion by 2020. Looking at a sector that could grow by 10X, it’s no surprise that a smart company like Johnson Controls sees the value behind A123’s advanced batteries, even if A123’s management could not escape bankruptcy.

It’s unfortunate any time a company fails, and this is no different. But it would be wrong to take this company’s failure as an indictment of its technology or the wisdom of public-private investment in emerging sectors. And it shouldn’t become a political weapon. A123 is a company that received government funding (through bipartisan support) and was validated on the public markets, but has faced challenges and hasn’t managed to survive. The technologies and jobs it produced are still valuable in our economy and, thanks to Johnson Controls, will continue to be a good investment for the country in the future.