Electric car battery maker A123 Systems filed for bankruptcy on Tuesday, Oct. 16, dealing a serious blow to the Obama Administration's green energy program.

The Massachusetts-based company was part of President Obama's grand plan to build a domestic electric-car industry basically from scratch. Back in 2009, A123 Systems won a $249 million U.S. Department of Energy grant to build batteries for electric cars at a new plant in Michigan. The company may be best known as the battery manufacturer for the Fisker Karma hybrid.

A123 Systems' bankruptcy filing came unexpected, as the company recently struck a deal in late august to sell a majority stake to a Chinese auto parts maker. That agreement with the Wanxiang Group appeared to provide a lifeline for the struggling company, but A123 said the deal was never actually completed. On Monday, Oct. 15, A123 was supposed to make a debt payment of $75 million it had borrowed from Wanxiang, but it failed to do so.

A123 announced its bankruptcy filing and said it had agreed to sell its automotive factories and assets to Johnson Controls, another U.S. battery maker that has received federal funding. The deal was valued at $125 million.

A123 Systems once appeared as one of the most promising grant recipients under the Obama Administration's $2 billion stimulus program for electric car development. Now, the company's tumble may become a political Frisbee in the presidential campaign, especially since energy policy has been a leading topic.

Republican nominee Mitt Romney has consistently criticized Obama for the heavy spending on green-energy programs, including a $528 million loan to module maker Solyndra, which went bankrupt last year.

"A123's bankruptcy is yet another failure for the president's disastrous strategy of gambling away billions of taxpayer dollars on a strategy of government-led growth that simply does not work," said Andrea Saul, Mr. Romney's press secretary, in a statement to the New York Times.

According to Dan Leistikow, the Energy Department's director of public affairs, said that A123 has used about $132 million of its grant so far, in addition to another $6 million it received in 2007 from the Bush Administration. A123 also received a $9 million grant from Michigan, as well as various tax breaks. According to Leistikow, the federal funds would not be wasted because Johnson Controls would now operate A123's two Michigan factories.

"In an emerging industry, it's very common to see some firms consolidate with others as the industry grows and matures," said the official.

Meanwhile, Senator Charles E. Grassley, Republican of Iowa, and Senator John Thune, Republican from South Dakota, criticized the Energy Department for ignoring warning signs that A123 was going under.

"The bankruptcy raises the prospect that the taxpayers will get little or no return on their investment in A123 and will lose millions of dollars," said Grassley.