Monday, September 13, 2010

The Obama Administration Does Good... This time


I have been relentless in my condemnation of the Obama Administration, any reader of this webpage would have to agree (all two of you). Here I am going to give them a thumbs up. A123 Systems opened their new battery plant in Michigan today and it wouldn't have happened without some help from the U.S. government under Obama's management. I won't go so far as to say a President McCain wouldn't have done the same thing, but he's not the President and the credit goes where credit is due.

Some will say this is a waste of time, but I am not convinced that electric cars are a joke. If they become a viable alternative to gasoline powered cars for daily commuting and we can rely on coal or nuclear power plants over foreign oil for this sector of the transportation system I think it will be a win/win.

A123 Sytem's new plant in Livonia is now the largest lithium ion automotive battery plant in all of North America. It will produce lithium ion battery cells and packs. A123 Systems has been a major innovator in this technology area and has a large share of the rechargeable power tool market. Anyone who has used these types of power tools in the last few years can attest to how well these batteries work.

The Livonia Michigan plant has been planned for years. A123 systems had a hard time finding the venture capital to build in the United States - they were told they were crazy for not wanting the build in China. Unfortunately for American workers they did build in China just so they could guarantee that they could fulfill contracts as a supplier. But they want to build in America for the American market and for the American worker. It is ironic that the founder of the company is a naturalized American citizen who came here at age six from China. He is a patriot who seems to care for the American worker. The plant will employ 300 to start with but expects to employ thousands. They is a hope that this will spur further industrial development for a new generation of vehicles right in Michigan and the upper Midwest that has been so devastated by the teetering fate of the domestic auto and steel business.

Thanks to a $249 million grant from the U.S. Department of Energy (DOE) last year, as well as $125 million in refundable tax credits from Michigan’s 21st Century Jobs Fund the plant was built. A123 also has a DOE loan application pending for an additional $233 million.

The government did in this case step in where private capital wouldn't. It has been proven at times the government is the only entity that can take such risks - a small one in this case - and see them blossom and handed over to private enterprise. Still, this should be the exception not the rule. Since it was as much politics as market forces that has been killing American manufacturing it isn't far fetched to think that government will have a role in bringing it back.

The augment on the other side implying that when government steps in to pick the winners and the losers it is an artificial outcome and everyone eventually loses has some merit - it has been true when it is applied with a heavy hand. The numbers in the case of A123 Systems just don't speak of a heavy hand. Johnson Controls a direct competitor to A123 Systems also received a grant and began shipping batteries recently. I don't believe there is any danger that battery powered cars are going to devastate the internal combustion engine any time soon, but just as railroad, space exploration and electrification projects of past generations needed the helping hand of government so too will electric vehicles. If it turns out that electric vehicles are a bust the money the government spent will have been a proverbial drop in the bucket.

Or, we could sit back and watch all this go to China.


CW

3 comments:

Northman said...

There at least three of us.

Al Fin said...

Obama also lent several $billion to Brazil for their offshore drilling enterprise at the same time he was shutting down offshore drilling and other oil exploration in the US.

I'm all for giving credit, but when the man is destroying the underlying mechanism of the private sector of the economy, smooth talking, promise making, and a battery plant are not going to make up for the total waste he is laying to the country.

StaticNoise said...

Al Fin

You are right of course. It is a bit like thanking your kidnapper for giving you a glass of water isn't it...