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How the Stimulus Revived the Electric Car
Posted on Jan 31, 2012
By Michael Grabell, ProPublica
This story was adapted from Michael Grabell’s new book “Money Well Spent?: The Truth Behind the Trillion-Dollar Stimulus, the Biggest Economic Recovery Plan in History,” published Tuesday by PublicAffairs. It was produced by ProPublica.
A common criticism of President Obama’s $800 billion stimulus package has been that it failed to produce anything—that while the New Deal built bridges and dams, all the stimulus did was fill some potholes and create temporary jobs.
Don’t tell that to Annette Herrera. She was 50 when the auto supplier she worked for in Westland, Mich., closed its factory and moved the work to Mexico. Then, after being unemployed for 2½ years, she got a job in October 2010 with A123 Systems, which had received $250 million in stimulus money to help open a new lithium-ion battery plant in nearby Romulus, Mich.
“The first thing I did was call my husband and tell him, ‘You’re never going to guess! I got a job!’” Herrera recalled. “And then it was like celebration time.”
One success the Obama administration can duly claim is the rebirth of the electric-car industry in the United States. Automakers have unveiled a number of mass-market electric cars, which have seen small but rising sales. Battery and parts manufacturers are building 30 factories, creating thousands of new jobs. A123 has hired 700 workers at Herrera’s plant and a second one in nearby Livonia, and plans to hire a couple thousand more people over the next few years.
If it wasn’t for the stimulus, the companies say, they would have built these plants overseas.
It was all part of an effort to promote “green” manufacturing and put a million electric cars on the road by 2015.
The question is: Will it last?
Elkhart, Ind., once believed it would. It saw electric vehicles as its salvation after watching its unemployment rate hit 20 percent. Eager to seed a new industry, the county witnessed electric-vehicle ventures sprout out of nowhere as the stimulus took off in 2009.
But by late summer 2011, what had sprouted were weeds. The parking lot of the Think electric-car plant was full of them, some more than a foot high growing from the cracks. Out front were two pickups and a motorcycle.
Hundreds of laid-off factory workers were supposed to have found jobs churning out the Norwegian company’s bug-like, plastic-bodied cars, which ran solely on electricity.
Today the Elkhart factory employs two. Its parent company filed for bankruptcy in June. Its largest shareholder and battery maker, Ener1, which received $118 million in stimulus money, did the same last week.
A second life
Electric cars began appearing on California roads in the mid-1990s after state regulators mandated that a certain percentage of automakers’ fleets include zero-emissions vehicles.
But within a few years, they were deemed a failure by car companies, which stopped making them and took back those they had leased.
Much had changed in the eight years leading up the stimulus package. The lead-acid and nickel-metal hydride batteries that weighed as much as 1,200 pounds were replaced with lithium-ion batteries that weighed as little as 400 pounds.
In the early 2000s, gas hadn’t even passed $2 a gallon. Less than a decade later, it was twice that. Toyota had proven the demand with its long waiting list for the Prius hybrid.
Government policy had changed, too, with a 2007 energy bill that increased fuel-efficiency standards and provided $25 billion in loans for automakers to upgrade their plants.
But until the economic stimulus package was passed in 2009, the manufacture of electric cars and their batteries in the United States was nearly nonexistent.
The United States had only two factories manufacturing less than 2 percent of the world’s advanced batteries. Most were made in Korea and Japan. In America, only Tesla manufactured an electric car—which sold for a cool $100,000. Across the entire country, there were a mere 500 electric charging stations.
But as the stimulus kicked in, there was suddenly no better environment for the electric car to thrive.
With more than $2 billion in federal grants, matched by another $2 billion in private investment, the Obama administration was supporting electric cars from the mine to the garage.
Chemetall Foote Corp., which operates the only U.S. lithium mine, received $28 million to boost production at its plants in Nevada and North Carolina. Honeywell received $27 million to become the first domestic supplier of a conductive salt for lithium batteries. More than $1 billion was spent to open and expand battery factories, many of them in hard-luck towns across Michigan. Through a separate federal program, automakers received loans to retool their assembly lines.
Customers could receive a $7,500 tax credit for buying an electric car. The stimulus provided funding for 20,000 electric charging stations by 2013. In many cities, drivers could get a home charger for free.
Although electric cars would not make up for the generation-long loss of manufacturing jobs, at least not yet, it was novel to see companies creating jobs in the Rust Belt instead of outsourcing them.
In July, Johnson Controls opened the first U.S. factory to produce complete lithium-ion battery cells for electric vehicles. Compact Power is building a $300 million factory in Holland, Mich., to produce batteries for the Chevy Volt and the electric Ford Focus. A123 now supplies the luxury electric carmaker Fisker Automotive and the manufacturers of electric delivery trucks used by FedEx and Frito-Lay. “Quite simply, if we didn’t get that grant, we wouldn’t have built [the factory] in the U.S.,” A123 spokesman Dan Borgasano said.
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