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U.S.-backed battery-makers fall to foreign competitors

Analysts wonder whether A123, Ener1 grew too fast for infrastructure that did not exist

When the U.S. decided to jump-start its battery industry essentially from the ground up in 2009, it was taking on Asia’s technology titans: Samsung, Sanyo and Panasonic, among others.

President Barack Obama saw a future filled with electric cars and in total pumped about $5 billion in federal funding into the emerging technology. It was all part of a new economy that promised “green” jobs.

But drivers didn’t buy into the electric vehicle craze as Obama anticipated. Two battery companies the U.S. funded to supply those vehicles buckled under, plagued by manufacturing errors and weak demand.

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When Ener1, with battery-making operations in Indiana, fell into bankruptcy in January, a Russian oligarch snapped it up.

And when A123 Systems Inc., a Massachusetts company with its manufacturing operations in Michigan, flirted with bankruptcy this month, a private Chinese company with its U.S. headquarters in Elgin agreed to invest $465 million for an 80 percent stake.

For U.S. taxpayers, the loss of control over such companies means that instead of nourishing U.S. clean tech companies to compete with Asia, the firms have fallen into their foreign competitors’ arms.

“There are no legal or effective means to prevent foreign investment in U.S. companies,” said Skip Pruss, former director of the Michigan Department of Energy, Labor and Economic Growth.

“If we fail to support investment with good policies that focus U.S. strengths in innovation and technology and advanced manufacturing, address energy security issues, and capture rapidly evolving global markets, we will not be able to compete with our global competitors who want these technologies,” Pruss added.

Funding companies that can’t compete, Pruss said, is exactly what the U.S. was trying to avoid.

State and federal leaders still envision that transportation will increasingly run on electricity. The fear is that with battery manufacturing in the U.S. struggling to gain ground, the U.S. could soon find itself importing batteries, once again facing the prospect of being held hostage by foreign countries for its fueling needs.

The government tried to pick the right companies to support. In reviewing A123’s and Ener1’s applications for funding support, the U.S. Department of Energy said multiple panels of experts evaluated the technical, business and manufacturing aspects of their plans.

“Proposals were selected that would help enable the United States to develop a domestic manufacturing base to capitalize on the growing global market for advanced batteries,” a DOE official said in a statement.

The government chose to fund the companies rather than let automakers take the lead because the country was still in the wake of the recession. Two of the three major U.S. auto manufacturers — all based in Michigan — were in bankruptcy.

“Not only did they not have the capacity to develop this technology and manufacture it here, we also had the financial collapse,” said Pruss, who was also Michigan’s chief energy officer under then-Gov. Jennifer Granholm.
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