When the Obama administration announced $2.4 billion in matching grants Wednesday to charge up the nascent U.S. electric vehicle industry, Johnson Controls Inc. (NYSE:JCI), the big auto parts company, got the single largest grant, worth $299 million. The Deal Pipeline
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All told the government made 48 grants
throughout the supply chain, as The New York Times reports. It's a
varied list, but the presence on it of names like JCI and General Motors Co., which was third with nearly $240 million in grants, prompted a complaint from the CEO of International Battery Inc., a small, venture capital-backed firm that applied for a grant but didn't get one. Quoted in a Wall Street Journal article, the CEO, Mark Mills, argued that you need the little guys because that's who really produces innovation. He went on to say: "If we wound the clock back to 1980 and had the government funding computer operating systems, the probability that Microsoft would have been funded then would have been small."
Now, this is an objection to be taken seriously, regardless of the merits of International Battery's particular pitch (described in this
press release, by the way). Are we marching down the failure-strewn path of a national industrial policy? Are we embarking on another
U.S. Synfuels Corp.?
The Department of Energy, which administers the grants, would say no -- it's helping many technological flowers bloom, with the market to sort out the winners. It's also the case that there were smaller companies among the winners, and that the second-largest recipient, A123Systems Inc., is a recent startup (2001) with a roster of blue-chip VC and corporate backers. A123 got $250 million.
JCI, meanwhile, has been ramping up in advanced batteries since 2005, when it formed a JV with Paris-based Saft SA, a maker of high-tech batteries for satellites, medical devices and other applications. Its commitment didn't originate with a government program.
And, of course, these are matching grants, which counts for something at least.
Which puts us where, exactly? Probably in a position better than that of Japan Inc. on the eve of its vaunted (and long since forgotten) 1980s programs to build up in supercomputing and artificial intelligence. Possibly this is more like
Sematech, the government assisted semiconductor manufacturing consortium that seems to have pretty much succeeded.
But moving to e-vehicles on a meaningful scale is a far bigger and more complex undertaking, involving everything from consumer preferences to federal energy policy (what about that
gas tax?) to the creation of a charging infrastructure.
So what we know at this point is just this: It's an important effort, by no means assured of success, which will benefit from continued scrutiny. -
Kenneth Klee
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Juergen Lasowski
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