Battery maker A123 files for bankruptcy protection
Short of cash and hurting from slow sales of electric cars, battery maker A123 Systems Inc. sent its U.S. operations into bankruptcy protection on Tuesday and quickly sold its automotive assets.
The Chapter 11 filing in Delaware came one day after A123 warned that it likely would miss some debt payments and could be headed for court-supervised restructuring.
The company said in a statement that auto parts maker Johnson Controls Inc. would buy its automotive business assets for $125 million. A123 subsidiaries outside the U.S. were not included in the bankruptcy filing, the company said.
The filing is likely to stoke the debate in Washington over the Obama administration's funding of alternative energy companies. In 2009, A123 got a $249 million Department of Energy grant to help it build U.S. factories. Republicans have accused Obama of wasting stimulus money on the companies after the failure of politically connected and now-bankrupt solar power company Solyndra LLC, which left taxpayers on the hook for $528 million.
Shares of A123 Systems Inc., which went public three years ago, fell to 7 cents in morning trading. Shares during the company's initial public offering skyrocketed to more than $20 on the first day, a 50 percent jump, as investors clamored for a piece.
The company, which has contracts to make batteries for General Motors Co., BMW AG, Fisker Automotive and others, got the federal stimulus grant in August of 2009 to help build factories. Unlike a loan, it does not have to be repaid. Eventually A123 set up manufacturing operations in the Detroit suburbs of Livonia and Romulus, Mich. Those plants will now go to Johnson Controls under the deal. Under the terms, A123 had to match the grant money as it was used. So far the company has drawn about $129 million of the grant, spokesman Dan Borgasano said Tuesday.
A123 has struggled for several years as Americans have been slow to embrace electric cars. The company has yet to post a quarterly profit and lost $83 million in the second quarter as revenue tumbled 53 percent.
Just two months ago, A123 announced a $450 million lifeline from Chinese auto parts maker Wanxiang Group Corp., but A123 said in a statement that the deal has been scrapped.
Under the Johnson Controls purchase agreement, the company will get all automotive assets including lithium-ion battery technology, products and customer contacts. Johson Controls also will take over the factories in Michigan, cathode ray factories in China and an euity interest in a Chinese battery company.
A123 said it is in discussions to sell its grid, commercial, government and other operations that weren't purchased by Johnson Controls.
AP Auto Writer Bree J. Fowler contributed to this report from New York.