By Bob Negele
A123 Systems Inc., a car battery manufacturer which received nearly a quarter billion dollars in federal grants, has filed for bankruptcy. According to a report in the Chicago Tribune, the struggling company was considering a deal which would sell control to a Chinese firm, but ceded to political pressures to file bankruptcy.
There is a growing political frustration with technology companies that the U.S. federal government invested in being sold to China. The political pressure has gotten so strong that A123 would rather file for Chapter 11 bankruptcy than to allow any more U.S. technology to head overseas to China.
The Chapter 11 bankruptcy is different than many though. In this instance, there is a prepackaged deal “that would hand over control to Milwaukee-based Johnson Controls Inc. in a transaction valued at $125 million. China-based Wanxiang, which has its U.S. operations in Elgin, had agreed to invest up to $465 million in A123.
Since Wanxiang’s offer was nearly 5 times that of Johnson’s, it is possible that bondholders in the company will attempt to fight the sale. Wanxiang has not publicly stated whether or not it is still willing to invest so much more than Johnson, but if they are, the bondholders will have a strong argument to make before the bankruptcy judge.
One analyst sees the acquisition as a great benefit to both Johnson and A123. Michael Lew, an analyst for Needham and Co. (a New York based firm) was paraphrased as saying that:
“The acquisition is a great fit for Johnson Controls, which also has a battery manufacturing plant in Michigan. The company would gain big name customers like Fisker, Daimler and GM. At the same time, technology owned by A123 that helps recharge batteries while cars [are] breaking without stressing the battery could be used to supplement the company’s own battery lines.”
Lew also stated that this is most likely the best chance the U.S. has in establishing a lithium ion industry in the U.S. And since the emergence of hybrids and battery powered cars is on the rise, it doesn't take much to appreciate how important this industry can be for the future development of green cars.
The success or failure of companies like A123 will be important to determining our energy independence (one of the few things that all politicians can agree on as important). While it is a positive sign that the U.S. is taking an initiative in creating and keeping a lithium ion battery industry, it is yet to be seen if the investment will pay off.
For A123 specifically, we also seem to have bipartisan support for keeping the company domestic. “Both sides of the red-blue divide supported the federal infusion, including Gov. Mitch Daniels, a Republican, and Vice President Joseph Biden, a Democrat.”
Hopefully with this much across the aisle support the company will be able to flourish.