News Story

Video Shows President Obama, Top Politicians Praising Failed Green Company

Obama, Granholm, Levin, Stabenow and Energy Secretary Chu all praised troubled battery manufacturer

A video that has gone virtually unseen highlights the high-powered political rhetoric and unrealized promises put forth by President Barack Obama and Michigan’s top Democratic politicians regarding the heavily subsidized and now-troubled A123 Systems battery manufacturer.

The video, which had just over 600 views since it was posted in Oct. 2010 on YouTube, has Obama, U.S. Secretary of Energy Steven Chu, former Michigan Gov. Jennifer Granholm and U.S. Senators Carl Levin and Debbie Stabenow singing the praises of the now-troubled advanced battery manufacturer A123 Systems.

A123 Systems, which opened its lithium-ion battery manufacturing plant in Livonia in September 2010, saw its stock plummet to the lowest price ever at 82 cents this week. The previous high was nearly $26.

A class action lawsuit was filed against A123 Systems this week on behalf of shareholders  alleging a violation of federal security laws. According to Business Week, the lawsuit claims A123 Systems withheld information about defective batteries from shareholders who bought stock between Feb. 28 and March 23, 2012. The company estimated last month that the cost of replacing the defective batteries would be $55 million.

Last month, the company reported losing $90 million in 2011. It also laid off 125 of its reported 1,000 Michigan employees last year.

The company has become a poster child of government subsidies for green energy initiatives. The state of Michigan gave A123 Systems $100 million in MEGA tax credits. A123 Systems also received another $41 million in tax breaks and subsidies from the state. The Department of Energy awarded A123 Systems a $249.1 million grant as part of the federal "stimulus program."

Even with all the government subsidies, the company has suffered several setbacks.

But in 2010, politicians painted a far different future for A123 Systems.

In the video, Gov. Granholm’s press conference on A123 Systems was interrupted by a phone call.

It was President Obama on the line to remind the audience that it was his American Recovery and Reinvestment Act that enabled A123 Systems to be the “first American factory to start high-volume production of advanced vehicle batteries.”

Secretary Chu said in the video that he hoped A123 Systems could create “thousands of jobs.”

“It really does make me feel really happy, proud that we are starting things, giving jobs, creating new jobs and hopefully the first 300 are just the beginning. Another 300 and another 300 …thousands of jobs," he said. "It’s going to be great.”

Sen. Levin predicted “thousands of jobs” by 2011. Gov. Granholm said it made Michigan the “advanced battery capital of North America.”

The video highlights the political rhetoric behind Michigan’s green crusade, said one environmental policy expert.

“This shows the utter dysfunction of politicians’ efforts at economic development via media events and ribbon cuttings,” said Paul Chesser, associate fellow for the National Legal & Policy Center, in an email. “Just because they say a business will work, and they throw millions of taxpayer dollars at it, doesn’t mean it will be a success. Elected officials who conduct their policy planning this way exhibit tremendous arrogance.”

Senators Levin and Stabenow didn’t immediately provide comments when messages were left at their offices. A123 Systems Spokesman Dan Borgasano didn’t immediately respond to an email seeking comment.

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Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.

News Story

Education Budget Tightened, Alarmist Predictions Fail To Materialize

Novi teacher predicted cuts would 'likely make 40 students per classroom commonplace,' facts say otherwise

Last year, a Novi High School teacher published an op-ed in the Detroit Free Press where he lamented Gov. Rick Snyder’s budget cuts and said they “would likely make 40 students per classroom commonplace.”

When questioned about the claim last year, Novi High School teacher Rod Franchi replied in an email that his district “would probably have something like 40 students per class in many of our conventional classes. I was careful in choosing my words; I didn't say all classes but said 40 students would be commonplace.”

Franchi wasn’t alone when he went public with his concerns over Snyder’s cuts and the impact they would have on public schools. Administrators, teachers and union officials all painted worst-case scenarios.

Michael Van Beek, the Mackinac Center’s education policy director, questioned back then how classrooms could swell to 40 students in Novi when the district had 325 regular classroom teachers and 6,250 students.

Now, a year after Franchi’s op-ed, Novi School District’s overall average class size was 22.12 students in 2011-12, according to district documents received in a Freedom of Information Act request. Franchi’s average class size was 27 students for the first two semesters. The largest class size he had was 32 students.

Franchi said Wednesday he wasn't making a prediction about Novi's numbers.

"Since I was discussing the state budget, I was commenting on a statewide scenario that was quite possible," he said in an email. "And that is indeed true. Statewide, classrooms  with 40 students are far more common today. The larger point I made was that slashing funding would have both short-term and long-term effects on Michigan K-12 education.

"Whether classrooms are topping out at 45 in some schools or 35 in others, the numbers are up considerably, and from what I have seen, those increased numbers have a significant impact on instruction.

"My main purpose in writing the piece was for taxpayers to see what the budget would mean from someone at the point of instruction."

Franchi said his class sizes have been "considerably higher" this year than in the past.

The biggest classes in the district were at the high school. There were three class types that had average student sizes of 30 or more. Health classes averaged 30.40 students, music classes averaged 31.00 students and physical education averaged 38.70 students.

Novi had 11 classes in the district that had student sizes ranging from 40 to 59. All the classes were either physical education, band, or music except for one health class.

Van Beek said Franchi was like many others who wanted to protect the status quo.

“Defenders of the public school status quo say the same things nearly every time the state debates school funding,” Van Beek said. “If school revenues are increased, they say it’s still not enough and politicians don’t value public education. If revenues decrease, they describe hyperbolic disaster scenarios. The reality is that school districts have much more control over their finances then they let on, and a small percentage point increase or decrease in state funding won’t make or break their budgets.”

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.