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Obama-backed electric car battery-maker files for bankruptcy

Rhapsody1447

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Obama-backed electric car battery-maker files for bankruptcy

An Indiana-based energy-storage company that received a $118.5 million stimulus grant from the Energy Department filed for bankruptcy Thursday.
Ener1 is asking a federal bankruptcy court in New York to approve a plan to restructure the company’s debt and infuse $81 million in equity funding.
“This was a difficult, but necessary, decision for our company,Ener1 CEO Alex Sorokin said in a news release. “We are extremely pleased to have the strong support of our primary investors and lenders to substantially reduce the company’s debt.

The company said it hopes the plan will “support continued operation of Ener1’s subsidiaries and help ensure that the restructuring will not adversely impact their employees, customers and suppliers.”

The Energy Department in 2009 approved a $118.5 million stimulus grant for EnerDel, a subsidiary of the company that develops lithium-ion batteries used in electric vehicles. The grant was part of a broader program aimed at promoting the development of electric-vehicle battery technology.President Obama touted the program in his State of the Union address this year.
“In three years, our partnership with the private sector has already positioned America to be the world’s leading manufacturer of high-tech batteries,” he said.

At the time, EnerDel said the grant would help the company double its production capacity and create 1,700 jobs. But the company has faced major financial problems in recent months.

Ener1’s decision to file for bankruptcy will likely draw the attention of House Republicans, who are investigating the bankruptcy of Solyndra, the solar panel maker that received a $535 million Energy Department loan guarantee in 2009.

The GOP has pummeled the White House over Solyndra, raising broader concerns about the administration’s investments in clean-energy companies.

The Energy Department did not immediately respond to a request for comment on the Ener1 bankruptcy.

Obama-backed electric car battery-maker files for bankruptcy - The Hill's E2-Wire

More evidence that the DOE should not be blowing taxpayer money just because the investment has the potential to be "green". When will the government learn it can't sustain a capital-destructive industry by mis-allocating taxpayer money for good intentions? Two board members, including the Chairman, were former GM executives. I'm interested to see if company officials were former campaign donors like the previous disaster.

 

Deuce

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Wait. Batteries are a "capital-destroying" industry?
 

1Perry

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Seems to be contagious.
 

Pointy

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Wait. Batteries are a "capital-destroying" industry?

No they are not, but Government (Taxpayers cash) injected into non proven viable firms simply because some noodle-head has the idea that this is the way to go, is a stupid waste of valuable Taxpayer resourses.
 

teamosil

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It's weird we have to keep explaining to you guys that not every investment is going to be a winner. That's how the market works. If a company were a sure thing to be wildly profitable, there wouldn't be any point in the government investing in it, private investors would already be doing that. The whole goal with this thing is to try to push innovation along faster than the market would on its own. So if none of the companies we were investing in were going bankrupt you would know we were not really hitting the right mark. We need to aim right at the bleeding edge to try to tip companies from the "won't make it" category over into the "will make it category".
 
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beerftw

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seems clean energy companies are to obama as haliburton was to bush,nothing but a bunch of backscratching to pay government money to someone who doesnt deserve it.
 

1Perry

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It's weird we have to keep explaining to you guys that not every investment is going to be a winner. That's how to market works. If a company were a sure thing to be wildly profitable, there wouldn't be any point in the government investing in it, private investors would already be doing that. The whole goal with this thing is to try to push innovation along faster than the market would on its own. So if none of the companies we were investing in were going bankrupt you would know we were not really hitting the right mark. We need to aim right at the bleeding edge to try to tip companies from the "won't make it" category over into the "will make it category".

This isn't an example of the market. It's the government trying to pick who will succeed and fail and they are doing a pretty lousy job of that.
 

Caine

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It's weird we have to keep explaining to you guys that not every investment is going to be a winner. That's how the market works. If a company were a sure thing to be wildly profitable, there wouldn't be any point in the government investing in it, private investors would already be doing that. The whole goal with this thing is to try to push innovation along faster than the market would on its own. So if none of the companies we were investing in were going bankrupt you would know we were not really hitting the right mark. We need to aim right at the bleeding edge to try to tip companies from the "won't make it" category over into the "will make it category".

If the government has to invest in it because the private investors won't..... That tells me all I need to know about the viability of the business and how much of a waste of taxpayers dollars it is.
 

Deuce

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This isn't an example of the market. It's the government trying to pick who will succeed and fail and they are doing a pretty lousy job of that.

No, that isn't what the government is doing.
 

teamosil

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This isn't an example of the market. It's the government trying to pick who will succeed and fail and they are doing a pretty lousy job of that.

You don't understand. The government isn't just trying to pick winners. They aren't trying to make money by investing in the stock market or something. They're trying to increase and speed up the development of green technology.

Are you familiar with the concept of a positive externality? When an economic endeavor would create positive externalities, then the role of government is to help companies capture some of those externalities. That's what they're doing here, not day trading.
 

teamosil

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If the government has to invest in it because the private investors won't..... That tells me all I need to know about the viability of the business and how much of a waste of taxpayers dollars it is.

Are you familiar with the concept of positive externalities? A company might not be "viable" if you don't consider the positive externalities, but still produces a lot of value very efficiently when you take the positive externalities into account. That's the idea here.
 

Free_Radical

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It's weird we have to keep explaining to you guys that not every investment is going to be a winner. That's how the market works. If a company were a sure thing to be wildly profitable, there wouldn't be any point in the government investing in it, private investors would already be doing that. The whole goal with this thing is to try to push innovation along faster than the market would on its own. So if none of the companies we were investing in were going bankrupt you would know we were not really hitting the right mark. We need to aim right at the bleeding edge to try to tip companies from the "won't make it" category over into the "will make it category".

The Federal government is not a venture capital firm. They lack the requisite incentives and structure needed to successfully engage in speculative financial enterprises. What's more, they are prone to political bias and corruption.

Brian
 

danarhea

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No they are not, but Government (Taxpayers cash) injected into non proven viable firms simply because some noodle-head has the idea that this is the way to go, is a stupid waste of valuable Taxpayer resourses.

I agree. Here's the deal. If the government can help a business get "back into business", and put people to work, I am all for it. But before lending money to those businesses, the government should do what banks do, and assess those businesses. If they are not worth saving, then the government should let them fail. Obama did great with the automakers, but failed with Solyndra, and now this. This is because he is just throwing money at the problems. That might have worked for the automakers, but it didn't work here. If the government is going to spend money, it should do so wisely. The government should also not treat the money as a givaway, but as a loan, WITH INTEREST.

I believe that Mitt Romney, with his experience in business, would have done it the same way as I outlined above.
 
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teamosil

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The Federal government is not a venture capital firm.

That's right. That's my point. You guys are evaluating them the way you would a venture capital firm. That's not what they're trying to do at all. They're trying to boost up companies that generate positive externalities.
 

danarhea

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That's right. That's my point. You guys are evaluating them the way you would a venture capital firm. That's not what they're trying to do at all. They're trying to boost up companies that generate positive externalities.

Read my post, the one right above yours.
 

Free_Radical

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That's right. That's my point. You guys are evaluating them the way you would a venture capital firm.

That's because they're taking capital and investing it in speculative enterprises with the expectation that there will be some return on the investment. If they don't want to be evaluated like a venture capital firm, then they should stop behaving like one.

That's not what they're trying to do at all. They're trying to boost up companies that generate positive externalities.

In other words, they're investing capital in speculative enterprises with the expectation that it'll generate a return of some sort. Sounds like they think they're a venture capital firm.

Brian
 

1Perry

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You don't understand. The government isn't just trying to pick winners. They aren't trying to make money by investing in the stock market or something. They're trying to increase and speed up the development of green technology.

They are trying to make money by investing in the stock markets but that is a different topic.

Are you familiar with the concept of a positive externality? When an economic endeavor would create positive externalities, then the role of government is to help companies capture some of those externalities. That's what they're doing here, not day trading.

Sorry, I have no specific information here but I imagine that this was much like Solyndra. Their model was gone over up and down and left and right and it was determined that they could not succeed at what they were doing. It mattered none to the government.

You want to fund research into technology to create long lasting batteries? O.K., I'll listen and consider that. Not as a profit center that can go bankrupt though.
 

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Read my post, the one right above yours.

The thing you're missing IMO is the positive externalities. A company which is producing value when you take the positive externalities into account is "worth saving" even if it will never be profitable in the market, which doesn't take those externalities into account.
 

Free_Radical

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The thing you're missing IMO is the positive externalities. A company which is producing value when you take the positive externalities into account is "worth saving" even if it will never be profitable in the market, which doesn't take those externalities into account.

What "positive externalities" are you referring to?

Brian
 

teamosil

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In other words, they're investing capital in speculative enterprises with the expectation that it'll generate a return of some sort. Sounds like they think they're a venture capital firm.

No... Helping companies capture positive externalities (or pay for negative ones they create) is a fundamental role of government in a capitalist society. Every capitalist economist all the way back to Adam Smith himself will tell you that.
 

danarhea

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The thing you're missing IMO is the positive externalities. A company which is producing value when you take the positive externalities into account is "worth saving" even if it will never be profitable in the market, which doesn't take those externalities into account.

And that is where Obama failed. Solyndra was NOT producing value. In fact, it's process was not competitive with anybody else in the same market, and it was doomed to failure, no matter how much money could be thrown at it. I am not against Obama steering taxpayer money to companies that need it, and can eventually pay it back, but Obama has not gone about this in any kind of intelligent way.
 

teamosil

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Just for background in case I'm using terms people aren't familiar with:

What an externality is is a cost or benefit from something a company or person does that they don't pay or get. There are negative externalities and positive externalities. A negative externality is a cost that a company foists on others, a positive externality is a benefit that the company gives others that it can't charge for. In short, externalities are the things that the market doesn't take account of.

An example of a negative externality would be a corporation that is manufacturing widgets. It has two options for how to make the widget. One process costs $10, but involves dumping waste in the lake. That waste causes $10 worth of damage to fishermen, property values around the lake and water treatment plant costs. So really it is costing $20 for every widget they make, even though the company only pays $10. The other option is a process where they could make it for $15, but not dump waste in the lake. Left to it's own devices, the company will just do the $10 process, but that is actually the less efficient way to make the widgets. So, government has to step in. It can either forbid dumping waste in the lake or it can make the company pay $10 per widget to pay for cleaning it up, which has the same effect.

A positive externality is, for example, a shipping company decides they need a lighthouse on a particular rock. That benefits all the other shipping companies too, but there is no way to make them chip in, so the company that builds the lighthouse is unable to recoup the whole benefit of their work.

Every economist alive, going all the way back to Adam Smith himself, has agreed that government needs to regulate externalities. Otherwise it is just inefficient. The market doesn't account for them in any way, so the market just acts like they don't exist.
 

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No... Helping companies capture positive externalities (or pay for negative ones they create) is a fundamental role of government in a capitalist society.

Yes, they are investing capital in speculative enterprises with the expectation of generating a return, in this case, "capturing positive externalities". How is that different from a venture capital firm?

Every capitalist economist all the way back to Adam Smith himself will tell you that.

Please quote Adam Smith and every "capitalist economist" as saying, "Helping companies capture positive externalities (or pay for negative ones they create) is a fundamental role of government in a capitalist society."

Brian
 

teamosil

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What "positive externalities" are you referring to?

Green technology has huge positive externalities. Reducing global warming, positioning the US to lead the coming boom in green tech, reducing oil dependency, preparing us for when oil starts to run short, etc. All the benefits created by these companies that they can't capture- that they can't charge for- are positive externalities.
 
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