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We now know that the bankruptcy of General Motors will have an immediate impact on jobs at a GM warehouse in Norton and some of the company’s 98 dealerships in the state. But what’s not widely known is how the bankruptcy is also negatively affecting Massachusetts’ clean tech sector.
You may have heard of one big Massachusetts company that’s staked its future on the automobile industry. It’s A123, based in Watertown. It's building an almost $2-billion plant in Michigan to make batteries for the next generation of hybrids and electric cars. The company is going public, so it wouldn’t talk for this story. Instead, I talked to Matthew Nordan, a battery industry analyst at Lux Research in Boston.
"A123 is certainly ground zero for startup companies impacted by GM in Massachusetts," says Nordan.
Nordan says the challenge for A123 is not GM’s bankruptcy per se. It’s the whole American automobile industry in a tailspin that’s the real worry. A few years ago, he says, companies like A123 were banking on huge growth in the numbers of cars being sold around the world.
"It’s now likely that we’re looking at an auto industry five years out that may be only a little bit bigger than it was a couple of years ago," Nordan explains. "And if the pace of adoption of new technologies is lower, there’s just not going to be as big a market to sell into."
That certainly affects A123. Fewer cars mean fewer big batteries. But it also affects many smaller companies you probably haven’t heard of. Case in point: Xtalic. That’s a startup in Marlborough that’s developed a chrome-like finish from new nanotechnology out of MIT. The material lasts longer and has a greener manufacturing process than chrome. Xtalic CEO Tom Clay had been hoping to find lots of applications in the automotive sector.
"While about a year ago we saw a broad range of applications that were in the automotive space, for shock absorbers or wear components in the drive train, or even for decorative chrome pieces on the outside of a car, we began to get pretty strong feedback that people in the automotive sector were not in a position to consider right now making a lot of investment in new areas," Clay says.
Fortunately for Xtalic, the company has other applications for its technology while it waits for the auto industry to come around. But this is the sort of thing that gives small startups big headaches. GM’s bankruptcy is just causing more uncertainty about the market. That makes it hard for companies to plan and makes their investors wary about putting money into development.
Matthew Nordan at Lux Research says the downward trend has been hard on nanotechnology startups in particular. That’s because about half the time, he says, their technologies are applied in the automotive and construction industries.
"And what is being hit harder than anything else right now?" he asks. "Construction and automotive. So companies that are making raw nanomaterials - whether it’s by themselves or intermediate products, coatings or composites – are just getting hammered."
Still, some clean-tech companies in Massachusetts say despite the current troubles and uncertainty, the GM bankruptcy ultimately points to a better future for technologies developed here. The company Mascoma got money from GM to develop a technology to make the fuel additive ethanol more efficiently. GM actually owns part of the Watertown firm. Mascoma’s Chief Technology Officer Mike Ladisch says the bankruptcy is only securing Mascoma’s future.
"Basically they are reorganizing the company. Part of that picture is alternative liquid fuels," Ladisch says.
But exactly how big is that part? What’s the picture going to end up looking like? The uncertain future of U.S. automakers is creating a challenging climate for Massachusetts companies that want to develop technologies for the next generation of American cars.
This program aired on June 3, 2009.
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