Troubled Exide Technologies was already scrambling to fend off creditors and restructure the company when a California regulatory agency shut down its huge Vernon battery recycling plant in the middle of Los Angeles County in April.

That probably didn’t hurt as much as Walmart switching to a competitor, Johnson Controls Inc., in 2010 for its exclusive supply of automotive batteries. Exide Chief Financial Officer Phillip Damaska said that cost the Georgia-based company $160 million a year and got the ball rolling on restructuring plans. The company also struggled with the price of scrap lead and problems with its European operations that account for 51% of its revenue.

Damaska estimated Exide’s annual before-tax earnings from the Vernon plant were $24 million, according to Bloomberg, but larger expenses there loom. The state Department of Toxic Substances Control (DTSC) suspended operations at the facility weeks after the South Coast Air Quality Management District (AQMD) ordered the company to reduce arsenic emissions.

The DTSC ordered the shutdown after reports showed that the plant’s “underground hazardous waste-degraded pipelines are out of compliance with California's stringent hazardous waste requirements, and are releasing toxic metal-bearing water and pose a risk to the environment.” The AQMD said the plant posed an elevated cancer risk to 110,000 nearby residents.    

Liza Tucker with Consumer Watchdog, an advocacy group, blamed the DTSC for the pollution and the state’s potential financial liability: “Terrible regulation included the DTSC doing not nearly enough for years to address dangerous accumulations of lead, arsenic, and other contaminants on the ground from air emissions.”

Tucker said the $10 million posted by the company will not be enough to cover the plant’s cleanup. “That will not come close to actually cleaning up all the contamination at the site,” she wrote in a press release.

“What’s involved is cleaning up lead all over the neighborhood, digging up soil to deep levels around the plant’s equipment that also needs decontamination, and capping a dangerous slag landfill that has been leaking lead into the groundwater for decades. Never mind actually cleaning the groundwater of contaminants.”

Exide’s filing with a federal bankruptcy court in Delaware claimed assets of $1.9 billion and liabilities of $1.1 billion, but said that rising costs for materials and other setbacks have put its financial future at risk. Exide’s stock, which hit a five-year high of 17.98 in 2008, closed at 22 cents on Tuesday.

The company will reportedly continue to operate normally in Chapter 11—with the help of $500 million in financing from JPMorgan Chase— while the court figures out which creditors get paid.

–Ken Broder

To Learn More:

Exide, a Big Maker of Car Batteries, Files for Bankruptcy (by Michael J. de la Merced, New York Times)

Exide Files for Bankruptcy after Losing Wal-Mart Business (by Steven Church, Joe Schneider & Phil Milford, Bloomberg)

Battery Maker Exide Technologies Files for Bankruptcy Protection (by Kim Christensen, Los Angeles Times)

Exide Technologies Files for Bankruptcy and Threatens Californians with Bill for Cleanup that Top Toxics Regulator Botched (by Liza Tucker, Consumer Watchdog)

In Rare Move, State Suspends Operations at L.A.-Area Hazardous Waste Facility (by Ken Broder, AllGov California)

110,000 in Los Angeles Area Exposed to Arsenic Emissions from Battery Recycling Plant (by Ken Broder, AllGov California)