A123 Got $1 Million U.S. Grant Day It Filed Bankruptcy
A123 Systems Inc. (AONEQ), the electric-car battery producer, received a U.S. Energy Department grant payment of almost $1 million on the same day it filed for bankruptcy last month.
The $946,830 payment was part of $115.8 million in grant money the company, based in Waltham, Massachusetts, received from U.S. economic-stimulus funding intended to spur development of electric cars.
Republican Senators Charles Grassley of Iowa and John Thune of South Dakota disclosed the timing of the payment today when they released a Nov. 14 letter from Eric Pyenson, A123 vice president and general counsel.
The payment was made after A123 in August announced it planned to give Wanxiang Group Corp., China’s largest auto-parts maker, a majority stake in exchange for financing. Grassley and Thune had questioned the Chinese investment in the U.S. company.
“All of this paints a disturbing picture,” Grassley and Thune said in an e-mailed statement. “The Department of Energy is writing checks to a company literally as it is declaring bankruptcy.”
The letter’s release today adds to Republican criticism of President Barack Obama’s support of green-energy programs that included loans and grants to produce more fuel-efficient cars and support the development of solar and other alternative energy sources. Republican presidential candidate Mitt Romney said during a debate that Obama picked “losers” to receive energy aid.
“The Energy Department takes its responsibility to be good stewards of the taxpayers’ money very seriously,” Bill Gibbons, a department spokesman, said in an e-mail. “Funds are only disbursed to a company for work already completed toward the ultimate goal of the department’s grant.”
The total Energy Department grant to A123 was for $249.1 million, of which the company has received less than half.
A123 filed for bankruptcy protection after saying it would have to spend $55 million to replace defective battery packs that forced startup electric-car maker Fisker Automotive Inc., also a recipient of U.S. assistance, to recall its $103,000 Karma sedans.
A123 Chief Executive Officer David Vieau didn’t respond to an e-mail seeking comment.
The company yesterday in a U.S. Securities and Exchange Commission filing said it got court approval for bonuses worth as much as $4.2 million to 10 employees for staying on the payroll as the company’s assets are sold. The payouts of at least $2.4 million range from 70 percent to 100 percent of each employee’s base salary, according to the filing.
Grassley, his party’s ranking member on the Senate Judiciary Committee, criticized the company for awarding the bonuses and the court for approving them, saying the 2005 bankruptcy reform law was aimed at limiting bonuses for executives whose companies enter bankruptcy.
“Unfortunately, corporations have found ways to award these bonuses anyway,” Grassley said in an e-mail. “This situation is especially egregious when the company in question has received $133 million from the U.S. taxpayers, as A123 Systems has. It appears taxpayers are getting the short end of the stick in this deal.”
Grassley said he will investigate whether the company’s grant agreement may allow for the U.S. government to recover its money because of the bankruptcy filing.
A123, which plans to sell its automotive-business assets to Milwaukee-based Johnson Controls Inc. (JCI), had also supplied plug-in car batteries to General Motors Co. (GM), Bayerische Motoren Werke AG, truckmaker Navistar International Corp. (NAV) and SAIC Motor Corp., China’s largest domestic carmaker.
The company won court approval to sell its assets at a Dec. 6 auction, where bidders will include Johnson Controls and Wanxiang, which has said it wants to be the lead bidder for all of A123’s assets.
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