Electric Car Battery Maker A123 Systems Files Bankruptcy
By Dawn McCarty and Craig Trudell - Oct 16, 2012, Bloomberg News
A123 Systems Inc.
(AONE), a maker of rechargeable lithium-ion batteries for electric cars, filed for bankruptcy
after failing to make a debt payment that was due yesterday.
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 company may not have sufficient cash to fund operations and may need to
seek the protections provided under the U.S. Bankruptcy
Code,” A123 said.
The bankruptcy filing may fuel further political 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. 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.
Shares Fall
A123 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.
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.
Wanxiang plans 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. In yesterday’s filing, A123 said it was considering strategic
alternatives including “one or more potential transactions” to address its
liquidity problems. There is “no assurance” that A123 will be able to find a way
to continue to operate its business as a going concern, the company said.
Obama’s Call
President Barack Obama called A123 Chief Executive Officer David Vieau
and then-Michigan Governor Jennifer Granholm during a September 2010
event celebrating the opening of the plant in Livonia, Michigan, that the
company received the U.S. grant to help build.
“This is about the birth of an entire new industry in America -- an industry
that’s going to be central to the next generation of cars,” Obama said in the
phone call, according to a transcript provided by the White House. “When folks
lift up their hoods on the cars of the future, I want them to see engines and
batteries that are stamped: Made in America.”
Electric-vehicle sales since 2011 totaled fewer than 50,000 through
September, just 5 percent of Obama’s target to have 1 million such vehicles on
U.S. roads by 2015.
Republican presidential candidate Mitt Romney
said last month that Obama has picked “losers” for alternative-energy loans and
grants. His running mate, Paul Ryan, has called for all green-energy subsidies to be
eliminated.
A123 has posted at least 14 straight quarterly losses. Its shares have fallen
85 percent this year to 24 cents at yesterday’s close in New York and
traded at 16 cents at 8:29 a.m. before the start of regular trading.
The case is In re A123 Systems Inc., 12-49658, U.S. Bankruptcy Court,
District of Delaware (Wilmington).
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