Feds gave battery firm $1M on day of bankruptcy filing

• Electric car battery maker A123 Systems gets $946,830 taxpayer check
• Incident feeds critics who say Obama administration clean energy spending wasted
• Company has gotten $133.3 million from Energy Department stimulus fund -- and may ask for more

Electric car battery maker A123 Systems received a $946,830 check from the U.S. Energy Department on the day it filed for Chapter 11 bankruptcy last month -- providing more ammunition for critics who say the Obama administration is blindly funding failed clean energy companies.

The Waltham, Mass.-based company also told two U.S. senators in a letter this week that it may seek more money from the $249.1-million Energy Department stimulus award it won in 2009. A123's Oct. 16 check was the latest payment as part of the original grant, which is distributed incrementally as the company meets certain benchmarks. A123 has received $133.3 million of the grant so far based on its investments in new battery plants in Livonia and Romulus, Mich.

"If A123 (or an acquirer) needs to expand and/or update its current U.S. manufacturing capacity beyond current capacity, then it is possible that it may desire to take advantage of some or all of the remaining grant funds to do so," A123 Vice President and General Counsel Eric Pyenson told U.S. Sens. Chuck Grassley and John Thune in a Nov. 14 letter.

The senators in October wrote a letter to A123 with questions about the company's contracts and Energy Department funding.

"The Department of Energy is writing checks to a company literally as it is declaring bankruptcy," Grassley and Thune said in a statement Friday. "The Department of Energy needs to answer for why it appears to put federal grants on autopilot to the detriment of U.S. taxpayers. This can't stand."

The Energy Department has said it will consider distributing the rest of the grant funding to A123 or to its eventual buyer despite the company's bankruptcy.

"The Energy Department takes its responsibility to be good stewards of the taxpayers' money very seriously," DOE spokesman Bill Gibbons said. "Funds are only disbursed to a company for work already completed toward the ultimate goal of the Department's grant. Through its investments, the Energy Department is helping to build an American manufacturing industry for advanced batteries, support American workers and ensure that the U.S. is able to compete in a fiercely competitive global market."

A123 did not respond to requests seeking comment.

The fate of A123's assets will be determined in a bankruptcy auction. Chinese auto supplier Wanxiang and Milwaukee-based supplier Johnson Controls are bidding for A123's assets.

Wanxiang had struck a deal with A123 this summer to acquire up to 80% of the company, but that deal fell apart after Republicans questioned the accord. If Wanxiang wins the bankruptcy auction for A123's assets, it will still have to secure approval from a federal committee that signs off on the sale of potentially sensitive assets to certain foreign companies.

Meanwhile, A123 also came under scrutiny from a federal trustee charged with providing oversight in bankruptcy cases for the size of its proposed performance bonuses for senior executives. The original bonuses, priced at a total of $2.4 million to $4.2 million for 10 employees, were reduced by 12.5% by a bankruptcy judge.

A123, formed a decade ago with intellectual property from the Massachusetts Institute of Technology, promised to add thousands of jobs in Michigan after winning the federal grant -- as well as more than $125 million in tax credits and grants from the Michigan Economic Development Corp. in 2008 and 2009.