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USA: Electric Car Battery Maker A123 Systems Files Bankruptcy

Machines are used to fabricate batteries at the A123 Systems lithium ion automotive battery manufacturing plant in Livonia, Michigan.

A123 Systems Inc. (AONE), the electric car battery maker that received a $249 million federal grant, filed for bankruptcy protection and said it would sell its assets to Johnson Controls Inc. (JCI)
Enlarge image Electric Car Battery Maker A123 Systems Files for Bankruptcy

A123 Systems Inc. fell as much as 16 cents, or 70 percent, to 7 cents a share in over-the-counter trading as of 9:43 a.m. Photographer: Jeffrey Sauger/Bloomberg

The filing may fuel a debate over government financing of alternative-energy and transportation businesses. Federal grants and loans to companies including A123, Fisker Automotive Inc. and Tesla Motors Inc. (TSLA) have drawn scrutiny from congressional Republicans following the September 2011 bankruptcy filing of solar-panel maker Solyndra LLC two years after it received a $535 million loan guarantee from the U.S. Energy Department.

“This action is expected to allow the company to provide for an orderly sale of the automotive business assets and all other assets and business units,” A123 said in a press release. Johnson Controls plans to acquire A123’s automotive business assets in a deal valued at $125 million and will provide financing of $72.5 million to support A123’s continued operations, according to the release. A deal to sell a majority stake to a Chinese company fell through, A123 said.

The Energy Debate Continues at

The company listed assets of $459.8 million and debt of $376 million as of Aug. 31 in Chapter 11 documents filed today in U.S. Bankruptcy Court in Wilmington, Delaware.

The Waltham, Massachusetts-based company said yesterday it expected to fail to make an interest payment due yesterday on $143.8 million of notes expiring in 2016.
Shares Fall

A123 fell as much as 18 cents, or 76 percent, to 6 cents a share in over-the-counter trading as of 12:00 p.m.

A123, which received a $249.1 million federal grant in 2009 to build a U.S. factory, needed a financial lifeline after struggling with costs from a recall of batteries supplied to Fisker, the plug-in hybrid luxury carmaker. A123 announced in August that it was working on a deal with Wanxiang Group Corp., China’s largest auto-parts maker, for financing in exchange for a majority ownership stake.

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“We determined not to move forward with the previously announced Wanxiang agreement as a result of unanticipated and significant challenges to its completion,” David Vieau, A123’s chief executive officer, said today in the company’s statement. Wanxiang had planned to invest as much as $465 million in A123, giving the Hangzhou, China-based company a stake of as much as 80 percent, A123 said in an Aug. 16 statement.
Johnson Controls

Johnson Controls plans to acquire A123’s automotive business assets, including its facilities in Livonia and Romulus, Michigan. The Milwaukee, Wisconsin-based company also will obtain A123’s cathode powder plant in China and its equity interest in Shanghai Advanced Traction Battery Systems Co., A123’s joint venture with Shanghai Automotive Industry Corp.

“Our interest in A123 Systems is consistent with our long- term growth strategies and overall commitment to the development of the advanced battery industry,” Alex Molinaroli, president of Johnson Controls Power Solutions, said in today’s statement. “We believe that A123’s automotive capabilities are a good complement to our existing portfolio.”

A123 has used $132 million of the $249.1 grant awarded by the U.S. in 2009 toward building the two Michigan factories, the Energy Department said today in a posting on its website. A123 was required to spend up to one dollar of its funds for every incentive dollar received from the government, according to regulatory filings. The company also received a $6 million grant from the George W. Bush administration in 2007


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