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News A123 Systems files for bankruptcy

  1. Oct 16, 2012 #1


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    After receving $249.1 million grant from the US Department of Energy and $125 million in tax credits and incentives from the Michigan Economic Development Corp., A123 Systems is filing for Chapter 11. What remains to be seen is how the debtors will run the company and if the jobs promised here in the US will be transferred overseas.
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  3. Oct 16, 2012 #2
    My previous boss was a high-ranking official at A123. From what I heard, the place was a mess. Good mangers and engineers have been leaving the company for better opportunities in droves.

    On the other hand, you cannot really expect each government-sponsored company to thrive and become a multi-billion dollar business. Also, didn't China severely limit the export of rare-earth minerals essential for Lithium battery production?
  4. Oct 16, 2012 #3


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    Why do you say that?
  5. Oct 16, 2012 #4


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    I once said; "I've never lost money in the market."

    That is no longer true.

    I just lost a poop-load on A123.

    I've also told people, way long ago, that if A123 goes down, it means Americans don't understand squat about science, sociology, nor economics.

    But now, I understand why Cantor has been shorting the American dollar.

    good night, and god bless PF
  6. Oct 16, 2012 #5
    I have been dealing with NYSERDA for quite some time, which is the Research and Development Authority of NYS. They have funded hundreds, if not thousands, proposals that could lead to a groundbreaking invention. Or they could not. Needless to say that most of the money is spent without ever attaining the original goal! The point is that until you do the research, you never know. The world out there is hardly deterministic.

    This example could be extended to the Federal Government. How can you possibly make sure that every single company you put money in will become successful and profitable? That's not possible. The government cannot choose winners and losers. What it can do, however, is to sponsor a company with the best proposal and the best chances of surviving its nascent age. And I believe this part is done quite well.
  7. Oct 16, 2012 #6
  8. Oct 16, 2012 #7


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    I don't see how that's relevant here: we're not talking about pure R&D efforts, we're talking about companies who manufacture actual products. I'm OK with the government spreading R&D money broadly/thinly.
    I believe this thread is an example of the government not doing it well. And I believe that the Obama administration has made poor business decisions based on political goals, in a two-step process:

    1. Deciding what industry to support and what not to support.
    2. With a lot of money to spend in small industries, throwing money at companies without properly vetting their viability.

    Furthermore, if we're going to have a government who is going to support business with direct corporate stimulus, who better to do it than someone who made a good fraction of his living doing exactly that with private funding? Or, perhaps Romney would decide that that is better left to venture capital firms and get the government out of that business. From the article in the OP:
    Would you invest in such a company?!
  9. Oct 17, 2012 #8


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    At least I didn't lose as much as General Electric. They invested $73,000,000.
    And A123 had an IPO market cap of $2,000,000,000.
    So it looks as though quite a bit more private money than public money was lost.

    That reminds me, with such a significant capital gains loss, can I write the whole thing off on my taxes next year and have all of you foot the bill for my losses? Seems like the wall street thing to do.

    ps. I've decided that playing the market is like fishing. You throw your line in, spent inordinate effort reeling in what appears to be a potentially good catch, only to find you've reeled in an old spare tire. Oh well, time to re-cast.
  10. Oct 17, 2012 #9

    Why for Christ sake would you invest money in R&D and not subsequent manufacturing? If I extend your logic, that's pretty much equal to "we invented a car that runs on water but let's just stick to the prototype". And how about NASA and other science agencies? Army labs? That's hardly broad/thin spending.

    The other argument of yours is funny: the government can choose which industry to support and which not. The decision to support a company has to be aligned with the program of the elected President and his Government. Clearly, renewable energy-focused government will support solar and wind as opposed to coal. I do not see anything wrong with that.

    And how can you vet a viability of a startup company that has no other assets than the idea and a few excited folks?

    Actually I am quite curious how you would assess such a company.
  11. Oct 17, 2012 #10


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    Sorry, had to rub that in a little. :devil:
    Probably, yeah.
    Last edited: Oct 17, 2012
  12. Oct 17, 2012 #11


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    *I* would, but the government doesn't actually invest, it just hands out money in grants and loans/loan guarantees. So where *I* would invest with the hope of turning a profit, the government doesn't hope to -- it actually plans not to. They assume all the risk without the chance of a benefit. I guess the fact that they aren't hoping to profit makes the poor decisions hurt less, but it also eliminates most of the incentive to make good ones.
    What is wrong with it is that the best political decisions don't always make for the best business or environmental decisions. For example, funding that is sent toward solar instead of nuclear unintentionally buoys coal because solar is expensive and can't produce much energy. But it sounds good in a speech.
    :confused: :confused: That's the entire point of venture capitalism!? People meet with venture capitalists and present an idea that they can sell and a business plan to sell it. Venture capitalists then decide if the idea looks marketable and the plan looks viable. For example, the business plan would say how much you can sell your batteries for and how much it costs to manufacture them. With A123, the quote I posted above says that the plan was decidedly unprofitable: the cost to manufacture was higher than the selling price.
  13. Oct 18, 2012 #12
  14. Oct 19, 2012 #13


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    yeah? I would say; "Yippy Kay Yay, PmF!"

    Anyways, I'm clueless as to why the stock is still trading, and made a 135% gain in the last 3 days.

    108,000,000 of 170,000,000 shares traded today.

    Wall Street is funny, in my book.
  15. Oct 19, 2012 #14


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    To quote from your link
    In fact, it's the same order of magnitude cost as accidentally wrecking one prototype of a jet engine. Which isn't something that jet engine manufacturers enjoy doing, but that doesn't stop it happening occasionally. (And for GE, they can easily get their money back by raising the price of light bulbs $0.01).
  16. Oct 20, 2012 #15
    I am sure that you realise that someone on Wall Street bet that you would lose money. And most likely that bet was made with borrowed money. It is the new and improved Casino Capitalism game.
  17. Oct 20, 2012 #16
    I heard it had quite a few patents so it wasn't a complete failure.
  18. Oct 20, 2012 #17


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    Don't even get me started on conspiracy stuff. So many companies/countries are after their intellectual property at the moment, it makes my head spin.

    Wang Chung, or whatever that Chinese companies name is(Wanxiang. I was close), is probably really pissed at the bankruptcy court's decision to let Johnson Controls get ahold of the company for a fifth of what they were offering.

    Interesting times. IMHO, this is why east coast Casino Capitalists spend millions trying to oust west cost congressmen, because said congressmen want to re-instate the wall street gambling tax.

    As usual, [Nixonian Expletives Deleted]

    ps. Solyndra has just recently filed a $1.5 billion dollar lawsuit.
    I guess in the end, Shakespeare was right.
  19. Oct 20, 2012 #18
    It seems Bill Moyer's 2010 Essay on Plutocracy was right on the money. no pun intended

  20. Oct 20, 2012 #19


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    Edward! You're going to get us both in trouble.

    This thread is about bashing the government for trying to fix the country, not about bashing plutocrats for sucking the life/wealth out of it. God knows the Caymans can use a few more trillion in their banks.

    I think Aleph was right, people appear to have no comprehension of orders of magnitude, nor, what is at stake.
  21. Oct 24, 2012 #20
    Actually it shows you don't understand squat about economics. If a company can't sustain itself in the market without massive government assistance then what it's doing is not economical. This has quite a bit in common with other parts of the malthusian energy plans: Politically contrived, hugely subsidized, and turned into political issues because they can't compete on their technological and economic merits.
  22. Oct 24, 2012 #21


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    massive? on what scale?
    not economical? in who's opinion?
    Though I do agree with Russ's assessment that perhaps a proper business model was not in place.

    There are people who have wanted their product, and due to A123's dismal business plan, they had no access to the product.

    And now, it's all up for bid....
  23. Oct 25, 2012 #22


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    google google google

    ah ha!



    Desertec sounds like a good idea to me, in theory.

    I suppose Malthus's ideas were dead on accurate 200 years ago, especially in England. But I believe the world has changed a bit since then. And we have a slew of other threads regarding overpopulation, so I'd rather not debate that here.
  24. Oct 26, 2012 #23
    Massive as in billions of dollars in government support for production and truely collosal subsidies. I consider billions of dollars a year for an industry with such paltry efficiency and outrageous prices to be massive.

    Now, specifically about A123. Yes, their business plan was flawed. Looking at their wiki page it's not hard to see why this was doomed to fail. Their main market appears to have been electric cars, which is at best a small niche that is being inflated by tax dollars. Realistically I figure we're at least one, maybe two decades away from a battery that is competetive with a traditional gas combustion engine. There's far better energy storage methods in methanol or maybe ethanol produced from methanol compared with what even our best batteries can offer right now.

    Their secondary market was energy storage for wind. Again, a small market. What makes this one a little bit different from the electric car market is that it's entire existence is politically engineered. Without government central planning that forces utilities to build these things to meet "green quotas" and large quantities of tax money in the form of credits wind farms wouldn't exist at all. We stopped using wind to power our ships (except for recreation) 100 years ago precisely because of its fundemental inefficiencies. This fact hasn't changed.

    All that being said, I understand why they did it. They and their investors fell for the sustainability hype and the only way they could get the government support they did was to toe the line.

    Nice red herring/ad hom. No, I'm not a conspiracy theorist. 9/11 was not an inside job, there is no illuminati and there is no NWO. Pointing out the ideology supporting the blatantly obvious political agenda behind these energy plans does not make me a conspiracy theorist.

    Actually I've talked to a number of wind and solar power supporters in real life. Each and everyone of them believes it will provide us with cheap and abundant power but the only reason it hasn't taken off is because of some vast conspiracy by the oil companies to suppress it, even though neither of them really competes with petroleum.

    Of course. Until we look at the http://depletedcranium.com/the-realities-of-sahara-solar-power/ [Broken]. Add to that the problem of costs (you realize this is hugely expensive and will only happen with massive amounts of tax dollars, right?) Add to that the inherent geo-political problem of making your electricity supply entirely dependent on a highly unstable region that's crawling with jihadis and you have a recipe for disaster. Suddenly this isn't looking so good, but such fanciful notions shows the dangers of governments picking and choose technological and scientific winners and losers. They do so for political reasons, not because of evidence or merit.

    Actually the Malthusian theory is alive and well. In reality it is the guiding ideology behind the contemporary environmentalist movement and its associated "sustainability" push. The world may have changed, but the Malthusian view of scarcity and limits has not changed. As an example:


    The image is hard to see but they provide a transcript at the bottom. That was written 80 years ago at a eugenics conference and yet current literature from the environmental organizations says virtually the same thing about resource use, industry, etc. The Malthusians want people to cut back resource usage and the only effective way to do that is to raise prices, hence their support for expensive and inefficient sources of energy. This isn't any more of a conspiracy theory than the effort by people with certain religious affiliations to get creationism in school biology classes. It's a political agenda that has some very grievous consequences if it is allowed to continue.
    Last edited by a moderator: May 6, 2017
  25. Oct 26, 2012 #24


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    I agree that there are dangerous consequences to the Malthusian philosophy, and hope to see them highlighted more ofter. A good case is made that Malthus helped cause a fraction million or so deaths from the Irish potato famine circa 1850, when there was ample other food.
  26. Oct 27, 2012 #25


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    "Paltry efficiency" and "outrageous prices" probably mean different things to you and I.

    My definitions:
    Chevy Volt: 94 mpg
    Scion iQ: 37 mpg​

    outrageous prices:
    price of imported petroleum products: $322 billion (annually)
    price of A123: $129 million (once)​

    Again, I parrot Aleph's "orders of magnitude" comment.

    It doesn't take a rocket scientist to realize that if everyone were to be driving hybrids, we'd be bleeding to death much less quickly.

    It goes without saying that there was something wrong with the business plan after a company goes bankrupt. And I plan on not falling into that trap once I get my business going. I, live and learn.

    I googled: "Malthusian energy plan"
    Only the LaRouche troupe and parrots use the phrase.
    The phrase, for me anyways, makes no sense.

    There's that "massive" again....
    See my above response to "outrageous".
    I consider money leaving the country to be a much greater tax, than money staying put and recirculating here. Perhaps like some, you only see the word "tax" as something solely related to some form called a 1040. I like to think of it more broadly, as in "taxing". Kind of like; "You are taxing my patience".

    And as far as how many energy production/storage/efficiency options there are is a very good question.
    We have solar thermal, solar PV, wind, hydraulic, pneumatic, chemical, kinetic, thermodynamic, biological, etc. etc.
    I would like to government invest in them all, just like I did.
    Did you know that if everyone of my financial standing had invested as much as I did in A123, they'd have a market cap of 240 billion dollars right now. And I've only invested $100 per month!

    Wow. That would give them the 5th largest market cap in the world.

    This makes absolutely no sense to me whatsoever. Would you please provide a reference to a modern day Malthusian. Please be specific, as in, a single person.

    I can't seem to find one.
    ps. Your rhetoric makes me laugh

    "Massive ... government support ... truely collosal subsidies. ... paltry efficiency ... outrageous prices ... massive. .... flawed. .... not hard to see ... doomed to fail. .... at best a small niche ... inflated by tax dollars. ....Again, a small market. .... it's entire existence is politically engineered. .... government central planning .... large quantities of tax money .... fundemental inefficiencies. ... fact ...sustainability hype ... government support ... toe the line. ... ideology supporting the blatantly obvious political agenda ... hugely expensive ... massive amounts of tax dollars... a recipe for disaster. ... fanciful notions ... dangers of governments ... winners and losers. ... political reasons.... the Malthusian theory is alive and well....eugenics conference ...The Malthusians ....expensive and inefficient .... a political agenda..."

    Those dreaded Malthusians..... Weren't they responsible for the deaths of all Trekkian red shirts?

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