Electric car battery company hits road bumps

Despite winning 249 million in stimulus dollars, A123 experienced two battery recalls, slow demands and layoffs.
CBS News

(CBS News) WASHINGTON -The White House has bet billions of tax dollars on lithium ion batteries for electric vehicles. But has that money been well spent? Here's one company's story.

This week, electric car battery maker A123 Systems announced a breakthrough: the next generation electric car battery -- better in extreme temperatures and cheaper.

The company desperately needs the good news after two battery recalls, slow demand and layoffs.

The road wasn't always so bumpy. When President Obama announced 90-billion stimulus tax dollars for green energy, A123 stepped up for a slice of the pie. It spent $1 million lobbying Congress and federal agencies, and won 249 million in stimulus dollars.

When an A123 plant opened in Michigan in 2010, the company even got a call from President Obama. "I'm calling to congratulate A123 Systems on this tremendous milestone," he said.

The plant meant jobs for people like Annette Herrera, who was out of work for three years. "Having this job means everything to me," she said. "It was really hard."

Herrera was among 1,000 workers who landed jobs at A123. CBS News spoke with CEO David Vieau last fall. "Approximately half the people here were unemployed, so we put people back to work," he said.

But one month after that interview, A123 laid off 125 employees.

Then the luxury electric car Fisker Karma failed. It was powered by a faulty A123 battery. "It's low, it's sleek, it's sensuous... it's also broken! " said Consumer Reports.

Electric vehicles fall drastically short of Obama's 1 million goal

A123 was forced to launch an expensive recall -- its second in four months. With $621 million in net losses since 2009, the company disclosed in SEC filings last month that there was "substantial doubt" about its "ability to continue."

A123 has declined further interview requests. As for that battery breakthrough announced this week, many analysts seemed underwhelmed.

"These new technologies that are introduced have to be vetted over a number of years before they actually find their way into products," said Theodore O'Neill of Wunderlich Securities. "So the product itself is interesting, but doesn't do anything to solve the financial problems that A123 has."

A123 isn't giving up. It still has more than 100 million federal stimulus tax dollars left to spend. Recently the company said it will hire 400 people -- not to build batteries for electric cars, but for power grids.

  • Sharyl Attkisson
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    Sharyl Attkisson is a CBS News investigative correspondent based in Washington.