Taxpayer-funded A123 goes 3-2-1-zero

 Greenies Solyndra, Chevy Volt, Fisker also proving zero-sum investments. Photo: A123

WASHINGTON, October 16, 2012 – We’re running a bit late today, filing just after 12 p.m. EDT on what thus far is a nice upside day on Wall Street. Today’s party comes after we had one yesterday, and both showed up for no apparent reason at all, unless HFTs and algos are already gaming options expiration later this week.

Aside from getting hosed and getting out of our precious metals positions yesterday in the midst of a horrible downdraft, our remaining positions remain flat to somewhat up as the broader market may be marking time until after the elections.

Speaking of which—you’ve heard about all those Obama “investments” of taxpayer-money that are producing all those zillions of “green” jobs across America? You know, the ones like solar manufacturer Solyndra which achieved oblivion after Obama-crony-owners collected fat paychecks from you and I and then ran their virtual company into the ground. Or like GM— which, due at least in part to the taxpayer-funded, taxpayer subsidized electric car for the rich known as the Chevy Volt—is still floundering on the Big Board, unable to get its stock price high enough to pay the taxpayers back with another “re-IPO.”

Or like A123 Systems Inc. (AONE), which filed for bankruptcy protection yesterday after failing to repay an undisclosed amount of indebtedness. “A123,” according to Bloomberg News, “which received a $249.1 million federal grant in 2009 to build a U.S. factory, needed a financial lifeline after struggling with costs from a recall of batteries supplied to Fisker, the plug-in hybrid luxury carmaker. A123 announced in August that it was working on a deal with Wanxiang Group Corp., China’s largest auto-parts maker, for financing in exchange for a majority ownership stake.”

Key informational nuggets live in this little Bloomberg quote, though the reporters did their best to put a little lipstick on them.

First of all, yes indeed taxpayers, another $249.1 million of your hard-earned dollars went to fund A123’s new factory, built in Michigan for some strange reason known only to the AFL-CIO. (Nothing like a couple hundred million smackers of other people’s money for Democrat vote-buying in an already union-devastated Rust Belt state.)

A123 hybrid battery module designed for hybrid vehicles. (Credit: A123)

Second, A123’s product apparently wasn’t good enough to power those expensive new Fiskers, so the company had to eat a recall, indicating, perhaps, that their product was not yet ready for prime time—just like the Chevy Volt, for example.

Third, and here’s a hint, note that Fisker is described as “the plug-in luxury carmaker,” which it is. What’s not mentioned is that you and I as taxpayers are subsidizing Fisker as well via government support for the startup. Ironic, in that the Fisker (or those two or three of them that the company has produced) is priced significantly higher than the costly Chevy Volt, meaning that American taxpayers are also helping support “luxury cars for the rich” in current Democrat-speak. So why are we doing this? Maybe to help goose Al Gore’s remaining green energy portfolio?

Fourth, A123 had “already been working on a deal with Wanxiang Group Corp.” for additional moolah which would give the Chicom company yet another production facility for cleaning our clocks on electric car battery production—the bulk of which, sad to say, is subsidized by China, developed in China, and creates plenty of Chinese jobs to manufacture batteries that power hugely expensive motorized toys for the rich.

Vehicles that, in case you didn’t notice, aren’t exactly selling like hotcakes at their lofty price points either.

“Electric-vehicle sales since 2011 totaled fewer than 50,000 through September, just 5 percent of Obama’s target to have 1 million such vehicles on U.S. roads by 2015,” according to the Bloomberg report. Forgive us for snarking, but those 50,000 vehicles vs. 1 million also gives us a pretty good idea why the promised millions (or was it billions) of “green jobs” we were promised will never happen. Or at least, not in the lifetime of anyone reading this.

If the truth were known, American taxpayers would be shocked—shocked—to learn just how many of the alleged millions of “green jobs” this administration has bragged about “creating” have primarily created employment in other countries, not the U.S. And even abroad, there aren’t “millions” of new “green jobs” being created anyway. These unreliable technologies are still way-far from being a done deal. They just cost too darn much for what they purport to achieve. It’s pure evil to cram these not-ready-for-prime-time “green” products down the throats of an economically damaged world that can’t really afford them.

Funny thing: the Maven actually scooped up some A123 stock during its IPO a few years back. The Administration made sure everyone knew from the outset that the White House—and your money—was backing this deal, so the Maven decided to take the initial ride on this obviously Federal government-supported stock. The stock had a healthy pop in the aftermarket, too. But the Maven sold his roughly a month after the IPO for a profit in the neighborhood of 25%.

Frankly, the Maven pretty much knew in advance what would happen eventually to this loudly-barking, doomed-to-fail puppy dog and it just did. The stock is bid at just 6 cents a share now if you’re dumb enough to scoop up 10 or 20 thousand shares on spec (which you should not). The Maven recalls selling his somewhere in the mid-20 dollar range.

The Maven is a good-hearted dude. But like all decent investors, he’s also cynical. The Obama Administration was fresh and new when this IPO hit the market. “Green investors” were flush with Hope and Change. And it was clear that ultra-utopian Green Meanies would drive this stock way up after the IPO opened, fueled by what then seemed like continuing waves of that newly discovered but abundant rare-earth element known as Hopium. So why not ride this lunatic wave and then get out before the inevitable occurred?

After all, there’s nothing like government-sponsored hubris to goose an IPO into the stratosphere. Seriously, how could you lose on this IPO when it was getting media hype like this:

Rare-earth element hopium is number zero on the periodic table.

“President Barack Obama called A123 Chief Executive Officer David Vieau and then-Michigan Governor Jennifer Granholm during a September 2010 event celebrating the opening of the plant in Livonia, Michigan, that the company received the U.S. grant to help build.

“’This is about the birth of an entire new industry in America — an industry that’s going to be central to the next generation of cars,’ Obama said in the phone call, according to a transcript provided by the White House. ‘When folks lift up their hoods on the cars of the future, I want them to see engines and batteries that are stamped: Made in America.’” Maybe Joe Biden could sell his boss one of those bridges he likes to talk about.

Sure, engines and batteries for these expensive trophy buggies might be stamped “Made in America,” all right. But those stampings would have been surreptitiously applied in the Chinese factories where most of them really were manufactured.

When all is said and done, it’s usually best to pay a lot of attention to the man behind the curtain. But the media, as usual, luxuriated in the White House hype, and investors (and taxpayers) ended up holding the bag for this, just like they did with Solyndra. Will they remember that in November? We’ll soon find out.

The endgame of A123 will more than likely involve Wanxiang or somebody else buying A123’s “assets” at a bargain basement price, keeping a few jobs here for a decent interval, and then outsourcing the whole shebang to Communist China.

And why not? According to Bloomberg, “the company and its debtor and non-debtor affiliates, collectively, have about 1,763 active employees, located in 10 facilities across the U.S., China and Germany, according to court papers.” In other words, an awful lot of A123’s jobs are outside the U.S. anyway—typical of what’s happened to U.S. taxpayer dollars that fund these bogus and wasteful “green” initiatives that do nothing to increase this country’s anemic rate of employment.

(Below: Former Michigan Governor Jennifer Granholm experiences an extended Howard Dean moment at the Democrats’ National Convention last month in Charlotte, North Carolina. The hopium comes on fast and thick as she brags about jobs that were never actually created.)

Flat out, when you do the math, there’s zero benefit for the American taxpayer in any of these ventures. That’s why the Romney-Ryan ticket is promising to put an end to this particular kettle of waste.

The fate of phony companies like A123 and Solyndra is the direct result of utopian thinking by immature policy wonks whose notions of “hope and change” are built on the extremely fuzzy logic of socialism. These theories, in turn, were beaten into them by their uniformly left-wing college professors, most of whom themselves have never encountered a real job during their cushy, cossetted lifetimes. This collective of the clueless hasn’t the slightest notion how business works in the real world or the faintest respect for the taxpayer money they’re using to build out their costly fantasy dream-worlds.

Which pivots us back to Wall Street in the real world, where the market this afternoon remains up over 100 points and may go even higher until it doesn’t. Hopefully, you have a few horses remaining in the race, and can pick off a few more profits today. Unless you’re still holding the bag, otherwise known as a few hundred shares of AONE.

Enjoy the day. It’s nice to have a good one.

Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate. He disposed of positions yesterday in DGP, IAU, ACQ, SLV, but re-acquired a small new position in DGP this morning.

Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.

Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.

References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.

Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.

Follow Terry on Twitter @terryp17

 


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Terry Ponick

Now writing on investing, politics, music, movies and theater for the Washington Times Communities, Terry was formerly the longtime music and culture critic for the Washington Times print edition (1994-2009) before moving online with Communities in 2010.  

 

 

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