China's auto parts conglomerate Wanxiang Group Corp. won the
bid for assets of Waltham, Massachusetts based lithium-ion
battery maker A123 Systems Inc., beating other suitors in the
Johnson Controls Inc.
) and Tokyo-based NEC Corp. The Chinese company has offered
$256.6 million to A123.
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Wanxiang bought A123's automotive segment, energy-grid storage
business, commercial business and U.S. government business. The
sale includes two facilities located in Livonia and Romulus in
However, it excluded latter's government business based in
Michigan. The Michigan-based business works with the U.S. Defense
Department, which has been sold to Plymouth, Massachusetts-based
Navitas Systems for $2.25 million.
Wanxiang may also get A123's interest in a joint venture with
China's Shanghai Automotive Industry Corp. (SAIC). The business
focuses on energy generation, transmission and distribution. It
also develops products for telecommunications, industrial
robotics and power tools industries.
A couple of months back, Wanxiang Group revealed that it will
place a superior bid for A123 compared to what Johnson Control
has offered ($125 million). In October, A123 and all of its U.S.
subsidiaries have filed petitions for reorganization under
Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy
A123 had a tough time dealing with lower orders for Karma plug-in
hybrid from its leading customer Fisker Automotive (which has
generated 26% of the company's revenues in 2011) in October last
year and a costly recall of battery packs made for the same
company this year.
A123 was also highly disappointed with its failed $465 million
deal with Wanxiang. At the beginning, Wanxiang gave $22.5 million
loan to A123, including a cash advance of $12.5 million.
Future cash flow from Wanxiang were dependent on meeting certain
requirements by A123, such as getting approval from the Committee
of Foreign Investment and the Chinese government as well as the
absence of any default. However, A123 had failed to meet some of
those conditions and the deal failed shortly before its
Lastly, weaker-than-expected demand for hybrids had adversely
affected the company's bottom line. All these factors led to
bankruptcy filing of the company that is only 11 years old.
A123 was entitled to receive $249 million grant from the U.S.
Department of Energy (D.O.E.) under the $90 billion grant for
several clean-energy programs in 2009. Till date, A123 has
utilized $132 million of the D.O.E. grant, which is about half of
the total amount. D.O.E. will decide on the remaining grant later
after the new owner of A123 takes control.