After a tumultuous year, A123 Systems has finally filed for bankruptcy protection after it says it was unable to make a payment on its debt, according to filings, a press release and media reports. The company, which was awarded a $249 million federal grant and has been the subject of much controversy, is looking to sell its business lines and has already lined up Johnson Controls to acquire its automotive business and two factories in a deal valued at $125 million.
Johnson Controls will also provide A123 Systems with $72.5 million to continue its operations at these factories, which will continue to produce batteries. The Department of Energy is already on top of the story, and sent me points stating that “A123 has only used $132 million of its 2009 grant (in addition to the $6 million from the Bush Administration.)” The bankruptcy will be sure to be controversial, and perhaps we’ll even hear about it in the second round of presidential debates tonight.
I’m not exactly sure what the status of A123 System’s deal with Wanxiang is at this point. The Chinese conglomerate announced a deal in August that said it planned to invest up to $450 million in A123, for an 80 percent ownership of the firm, if certain conditions were met. I’ve emailed Wanxiang to see if that deal has been abandoned. Seems like the deal would be off if Johnson Controls is buying up much of the assets.
Bloomberg notes that A123 has listed assets of $459.8 million and debt of $376 million as of Aug. 31 in its Chapter 11 documents filed in U.S. Bankruptcy Court. A123’s stock plummeted this morning by 73.50 percent to 6 cents. A123 went public in 2009, with its shares opening at $17 per share and closing at $20.29 per share on the first day of trading.
A123 has been bleeding cash for months. One of the problems was that in March A123 announced that it would start replacing battery packs with defective cells made at its Livonia, Mich., factory. That mistake cost the company $51.6 million in warranty costs during the first quarter and another estimated $15.2 million for replacing defective batteries that were in its inventory. A123 had to replace these defective batteries in its electric car maker customer Fisker Automotive’s inaugural cars.