How the Stimulus
Revived the Electric Car
by Michael Grabell | ProPublica
(Jan. 31, 2012) 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
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
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.
The battery grants have created and saved more than 1,800
jobs for assembly workers, toolmakers and engineers, according to a ProPublica
analysis of stimulus project reports filed by the companies. That number
doesn't include the workers who constructed the plants or those hired by the
matching private investment the companies had to make to get the grants.
The problem: Consumers have been slow to embrace the
The price of the battery is still too high, and the price of
gas is still too low, the Government Accountability Office warned in June 2009
before the grants were awarded. The starting price for the all-electric Nissan
Leaf is $33,000, while the hybrid Volt sells for about $40,000 before tax
credits — far more than many middle-class families can afford.
About 40 percent of drivers didn't have access to an outlet
where they park their vehicles, the GAO noted.
"Although a mile driven on electricity is cheaper than
one driven on gasoline," the National Research Council reported, "it
will likely take several decades before the upfront costs decline enough to be
offset by lifetime fuel savings."
Perhaps the biggest obstacle, though, was what the
automobile represents in the American psyche: the freedom of the open road.
While most people drive less than 40 miles per day, consumers want cars that
they can also take on summer vacations — and they don't want to have to
constantly worry about looking for a charging station.
The Leaf's range is just 73 miles, according to the official
government rating, well below the much-advertised 100 miles.
By the end of 2011, fewer than 18,000 Leafs and Volts had
been sold in the United States.
A report by congressional researchers last year concluded
that the cost of batteries, anxiety over mileage range and more efficient
internal combustion engines could make it difficult to achieve Obama's goal of
a million electric vehicles by 2015. Even many in the industry say the target
While the $2.4 billion in stimulus money has increased
battery manufacturing, the congressional report noted that United States might
not be able to keep up in the long run. South Korea and China have announced
plans to invest more than five times that amount over the next decade. Even
A123 had to lay off 125 workers in November — though Borgasano says the company
plans to rehire them all by June — because Fisker reduced orders.
Dick Moore, the mayor of Elkhart, had hoped the area known
for its recreational-vehicle factories would one day be not just the "RV
Capital of the World" but the "EV Capital of the World" as well.
Navistar International had received $39 million in stimulus
money to build 400 electric delivery trucks in the first year. But by early
2011, it had hired about 40 employees and assembled only 78 vehicles.
Think had rallied into 2011 with plans to start production
in Elkhart earlier than expected. But in April, assembly work suddenly stopped
as the plant awaited parts from Europe.
In June, Think's parent company filed for bankruptcy. The
decision left the Elkhart plant slouching toward extinction until the American
subsidiary was purchased by a Russian entrepreneur who promised to restart
production in early 2012.
But on Thursday, its battery maker, Ener1, also filed for
Chapter 11 bankruptcy, reporting that the demand for electric vehicles
develop as quickly as anticipated."
Elkhart's dream of becoming the EV capital?
Moore put it this way: "The fact that this hasn't moved
very quickly, that doesn't bode well for that idea."
The fate of the electric car depends greatly on whether
sales take off soon.
There are other factors, such as the price of gas and
whether Congress approves proposed standards requiring automakers to raise the
average fuel economy of their vehicles to 55 miles per gallon by 2025.
The electric car has always struggled with a chicken-and-egg
dilemma: Automakers have been reluctant to build electric cars without consumer
demand. But consumers won't buy them until automakers develop cheaper,
One of the goals of the ongoing stimulus spending is to
solve this problem. By 2015, the 30 battery and component factories will be
able to produce 40 percent of the world's batteries, according to the
The investments would help manufacturers increase the
batteries' life from four years to 14 and cut their cost from $33,000 to
$10,000, the administration said in a report on innovation. That would make the
electric car more competitive.
Herrera noted that many people at the A123 factory believe
they will never be able to afford the cars powered by the batteries they make.
But, she says, "you never know."
"When the flat-screen TVs first came out, they were way
expensive, and now they're reasonably priced," she said. "I think
that's going to be the same thing with electric automobiles. This is a new
product. It's going to take time."