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USA: Shaky Battery Maker Claims a Breakthrough

DETROIT — Lauded during a visit by President Obama, A123 Systems was supposed to be a centerpiece of his administration’s effort to use $2 billion in government subsidies to jump-start production of sophisticated electric batteries in the United States.
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Stephen McGee for The New York Times
Joe Parker, left, and Dwayne Washington at the A123 plant in Livonia, Mich.

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Stephen McGee for The New York Times
Prismatic battery cells are stacked at the A123 plant in Michigan. The company makes lithium-ion batteries for electric cars.
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Stephen McGee for The New York Times
Ronnie Slaughter at the banding station for a rechargeable battery that will go into a 2013 model of an all-electric vehicle.
Instead, the company, which makes lithium-ion batteries for electric cars, has stumbled along with the rest of the nascent industry and now threatens to give more ammunition to critics of the president’s heavy spending on new energy technologies.

A123 had to cut workers at its new factory in Livonia, Mich., financed in part with the promise of a $249 million government grant, after its battery for one new electric vehicle faltered and required an expensive recall. Completion of the factory has been delayed. The company is running short of money and has warned that unless it raises more cash from private investors, it might not be able to stay in business.

Yet as much as A123 represents the risks of the government’s battery technology program, it also represents its promise. On Tuesday, A123 Systems will unveil a new battery technology that the company says is a breakthrough in the industry.

The advance uses a new chemistry that could permit the creation of a simpler, lighter, longer-lasting battery pack that does not require a system to cool or heat it.

The success or failure of the new technology may well determine the fate of A123. It will also render an early verdict on Mr. Obama’s broader push to promote electric cars and build a domestic industry to develop and manufacture advanced batteries to run them.

The president’s prediction of a million electric cars on the road by 2015 seems unattainable, given the tepid demand for the first models on the market. So far this year, combined sales of the Chevrolet Volt plug-in hybrid and Nissan Leaf electric car total less than 10,000 vehicles. The slow sales have already become a campaign issue, and the failure of the solar-panel company Solyndra has also drawn intense criticism of the administration’s clean-energy subsidies.

In response to the Solyndra bankruptcy, which cost taxpayers about half a billion dollars, the Department of Energy has tightened controls on loans related to electric cars and other fuel-saving technology. In the case of Fisker Automotive, which received the defective A123 batteries, the government froze its loans when the company missed production schedules.

Executives of A123, which is based in Waltham, Mass., say the company has gotten off to a slower start than anticipated because the market for electric cars has failed to grow. The company reported a loss of $125 million in the first quarter of this year, as revenues dropped 40 percent from the year earlier.

“It’s been softer than what we and everyone else expected,” said David Vieau, chief executive of A123.

Yet the major automakers remain committed to electric vehicles so far, and G.M. has given A123 the contract to supply batteries for the Chevrolet Spark, an all-electric minicar due next year.

The government, for its part, recently gave A123 an extra two years to meet production targets at its Michigan factory and earn the full $249 million grant, which is being disbursed in tranches. So far, only about half the money has been given to the company.

In addition to the factory grant, A123 has received about $14 million in Energy Department money for research and development.

The government may have financed the company because “these guys have some new chemistry, some new ideas,” rather than the ability to commercialize the product, said Professor Prashant N. Kumta, a materials science expert at the University of Pittsburgh, who began working on lithium-ion batteries in the 1990s.
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