Friday, February 22, 2013

Another less-than-successful green venture funded in part by the feds

Autoblog Green has this interesting piece about a South Korean firm LG Chem that has committed fraud against the US government and GM. Now no one is calling it "fraud" or even "criminal," but if there is a distinction it is drawn with a very fine line. [DOE confirms LG Chem battery plant workers were paid not to make Chevy Volt batteries].

LG Chem was to produce batteries for the GM Volt in 2012. To that end, LG Chem was funded by the feds $142 million in cash (possibly drawn down from a credit line) and $175 million in tax breaks, and, of course, they were to hire 400. Well they hired 200 and failed to produce one battery. And the 200 hired were paid not to work.

Somebody blew the whistle and the feds audited: "We confirmed the allegations. We found that work performed under the grant to LG Chem Michigan had not been managed effectively. Based on progress to date and despite the expenditures of $142 million in Recovery Act funds, LG Chem Michigan had not yet achieved the objectives outlined in its Department-approved project plan."

I especially liked the "had not been managed effectively" part. A gross understatement that. And the response, a second try at explaining, from LG Chem: "In a statement to Automotive News, LG Chem admitted that the audit was correct and that it was "acutely aware of the disappointment from the delays in our start of production."

And the spin: they were "acutely aware of the disappointment . . . ." However, not even obliquely referenced in the Autoblog article is the cost to GM for the failed production. Apparently the feds are seeking repayment, but what about the tax breaks? I wonder - what will be the administrative costs to reset the clock?

Autoblog muses: "Whether LG Chem joins the list of less-than-successful ventures funded in part by the federal government – A12 Systems [should be A123 Systems], EnerDel and Solyndra – remains to be seen." [Links are Autoblog's.] These three companies have suffered bankruptcies.

Thus, the difference is that LG Chem is apparently not in any financial difficulty. Autoblog: "In 2011, Lux Research ranked LG Chem tops in the lithium-ion battery industry . . . ." Given the GM Volt experience -how does LG Chem make the top of the list?

$142 mil in cash and $175 mil in tax breaks - for 200 jobs that produced nada. At least some of the 200 "used the work day to volunteer with Habitat for Humanity, at animal shelters and outdoor nature centers." That was probably a better use of the stimulus funds.

No comments:

Post a Comment