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Obama-backed electric car battery maker faces possible bankruptcy

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Michael Bastasch Contributor
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Despite collecting nearly $100 million in stimulus funds and hiring a former Obama administration official, electric car charging station manufacturer Ecotality may have to declare bankruptcy, according to a report the company filed with the Securities and Exchange Commission.

“At this time, neither the Company’s direct sales force nor the independent dealers have generated sales volumes of its commercial [Electric Vehicle Service Equipment] products sufficient, in combination with other sources of revenue, to support the Company’s operations in the second half of 2013,” according to the filing.

The company also faces uncertainties over its electric vehicle service equipment “which causes overheating, and in certain rare cases melting, of the connector plug that connects” the charger to the vehicle. Companies using the chargers for their vehicles may notify their customers not to use Ecotality’s products which would, in return, continue to stymie efforts to increase sales.

Ecotality continued getting federal dollars while it was being investigated by the Department of Labor for violations of federal labor laws.

“The company has agreed to pay certain employees and contractors identified by the company and the DOL back wages and liquidated damages in an aggregate total amount of approximately $855,000,” according to the filing.

Ecotality received more than $100 million from the Energy Department as part of the stimulus package to install charging stations across the country in anticipation of the “wide release of electric vehicles.”

The company was initially reimbursed by the Energy Department for installing charging stations, but earlier this month DOE notified the company that it was freezing payments to the company pending an assessment of its viaiblity. However, the company was able to draw on $96 million in tax dollars before it was cut off.

“This suspension has had a significant impact on receivables that were anticipated to be collected from the DOE, in addition to remaining amounts anticipated to be invoiced and collected under the EV Project,” the company writes in its SEC filing.

The firm has been criticized in the past for focusing on political connections to secure subsidies rather than working on improving their products.

“I’m a political beast,” then-CEO Jonathan Read told shareholders in a 2007 conference call. “Playing the political card is something that when the time is right we’re going to play very hard.”

President Obama made increasing electric vehicle production and use a huge priority during his first term, unveiling his plan to get one million electric cars on the road by 2015.

“We believe the focus by the Obama administration [on electric vehicles] will provide strong funding opportunities for us and our core technologies,” the company wrote in an SEC filing a month after Obama won the 2008 election.

Ecotality also tried to pump up its political presence by appointing Brandon Hurlbut, the former chief of staff for former Energy Secretary Steven Chu, to its board. Hurlbut was also the former deputy director of cabinet affairs at the White House, and he worked for the Obama campaign in 2008 campaign.

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