In 2010, President Barack Obama highlighted A123 Systems during a White House press conference saying, "This is what's possible in a green energy economy." 

The president's words have been prophetic, but not in the way he envisioned. A123 Systems has become a study in government-subsidized failure.

Solyndra, a California solar panel company that received $535 million in federal aid and then went bankrupt, has been the poster child for green-energy failures. However, A123 Systems, which has its headquarters in Massachusetts but extensive automotive operations in Michigan, has its own list of issues. And, like Solyndra, the Obama administration trumpeted A123s Michigan battery plant in Livonia as the future of the green economy.

Most recently, the Detroit Free Press reported that A123 Systems received $946,830 from the U.S. Department of Energy as part of its $249.1 million grant on the same day it filed for Chapter 11 bankruptcy. A123 Systems is one of 19 green energy companies that received federal money and went bankrupt.

According to the company's SEC filings, A123 Systems has also suffered defective battery cells that cost the company $66.8 million; had investors file a lawsuit claiming the company withheld information about flaws; has run up a deficit of $856.9 million as of June 30 while still trying to get a plan to give its top executives up to $4.2 million in bonuses approved in its bankruptcy plan.

A123 Systems has spent $115 million of the $249.1 million federal grant and also has spent $8.8 million it received from the Michigan Economic Development Corp. for reimbursements of costs via a Center of Energy and Excellence Grant. The company also used a MEDC tax credit to offset $2.6 million owed for the Michigan Business Tax.

“It (A123 Systems) is not as much money as Solyndra, but it stinks just as bad, maybe worse,” said Paul Chesser, an associate fellow with the National Legal and Policy Center, who has reported extensively on A123 Systems. Chesser also is an adjunct scholar with the Mackinac Center for Public Policy. The NLPC is located in Virginia and promotes ethics in public life and believes in limited-government.

“It is just the aggregation of the whole thing. It’s a company that had no track record, which had no credibility. They were in it for the public money. They were cronies to the Democrats,” Chesser said. "Their batteries have failed over and over again. From the beginning, they've not had one profitable quarter. Their stock plummeted. There is nothing that warranted the company getting the stimulus money. From A to Z, A123 has been a head scratcher. Why did Michigan give them the money? It illustrates the Department of Energy's inconsistency in making these decisions."

However, one alternative energy analyst said the government is not the only one to blame for the green energy busts.

Patrick Michaels, director of the Center for the Study of Science at the Cato Institute, called A123 Systems a "rotten vertical conglomerate backed up by taxpayers."

He said a mindset of "crony socialism" is running green energy programs. He points to the 2008-2011 Wall Street Journal surveys of chief executive officers that highlight the top five priorities of CEOs.

In each of those annual surveys, CEOs cited a need for some sort of government subsidy as a top priority, Michaels said.

"You can't just blame the government for this," Michaels said. "You have to understand these large corporations are begging for favors to produce cars that no one wants."

Mike Shore, spokesman for the MEDC, and A123 Systems Spokesman Dan Borgasano didn't respond to requests for comment.

(Editor’s note: This commentary is an edited version of an Op-Ed that appeared in the Lansing State Journal on November 18, 2012.)

Voters on Nov. 6 rejected the state's emergency manager law, Public Act 4 of 2011, by voting against Proposal 1. This reinstates the older emergency financial manager law, Public Act 72 of 1990, largely giving the state the same power to appoint managers to oversee struggling municipalities and school districts.

Legislators should address the referendum by making some important revisions to the emergency financial manager law.

It's important to reflect the message voters sent by repealing this law.

Unfortunately, it's unclear exactly what that message was.

Proponents sometimes believed that this would eliminate both Public Acts 4 and 72 and made their case to the public against state-appointed managers.

Elimination of PA 72 was not the case, so the message may be about the differences between PA 4 and PA 72.

The most material change in the newer law was allowing emergency managers to unilaterally amend union collective bargaining agreements.

Labor costs, especially in school districts, account for the majority of expenses in local government units and Michigan has a highly unionized government workforce.

Legislators should consider reinstating this power if they interpret the message as being against emergency managers more than the difference between the acts.

If the message is about local control, then the state may want to consider only placing an emergency manager upon request of the local government. This has occurred in the city of Allen Park and the Muskegon Heights school district.

In lieu of the emergency manager, the state would likely need to strengthen its rules for consent agreements, which have been comparatively less effective in resolving fiscal emergencies.

Appointing a state monitor and providing real penalties to government officials who stray from contract terms may make these agreements more effective.

Regardless of interpretation, the state needs to make a couple of amendments to Public Act 72: clarifying the role of EFMs in school districts; the ability of EFMs to sell assets and appoint members to boards and commissions; and the multitude of other technical clarifications that Public Act 4 made.

The first version of Public Act 4 contained a penalty meant to ensure that local elected officials had a strong stake in the game to address fiscal problems before they become an emergency.

That provision — a 10-year ban from seeking re-election for those serving when the state declares a financial emergency — could be reinstated.

As a general rule, all local governments are creatures of state policy — the state sets the rules for what governments can and can’t do and how they operate.

These rules are sometimes generic, like requirements to abide by uniform accounting standards. They can also be restrictive, like property tax limits and balanced budget requirements.

The emergency manager law is one of these state-set rules, and it is also the state's final enforcement mechanism to prevent municipalities and school districts from falling into insolvency.

It's important to have a process that addresses fiscal emergencies in local governments while being fair to those that are able to fix their own problems.

Tweaking the emergency financial manager law will ensure that the state's solvency rules are enforced.