A123 Systems veers from Wanxiang to Johnson Controls and bankruptcy
A123 Systems long troubled year is finally, and unsurprisingly, heading into bankruptcy. Bankruptcy in this case does not mean a complete collapse and disappearance of A123's battery technology, but instead it is a Chapter 11 bankruptcy accompanied by a sale of technology and assets to Johnson Controls. That company already has a business in making lithium-ion batteries, making this a story of consolidation within the lithium battery industry. It also means A123 Systems is backing out of the earlier announced rescue buyout by the Chinese corporation Wanxiang, that was meeting with understandable political pressure.
The problems for A123 began last winter when A123 and Fisker Automotive jointly disclosed problems with battery packs that resulted in Fisker launching a recall to replace those battery packs. Later, A123 disclosed discovery of manufacturing defects in one of its battery pack manufacturing plants, that led to an expensive "field campaign" to replace those packs. The field campaign cost the company $55 million, throwing its financial status into a tizzy. Amid the bad news the company has also had good news, including deals to supply battery packs to SAIC (the Chinese automaker) and Tata (the Indian automaker). Another piece of good news was the Nanophosphate EXT technology that would open new markets to A123 and make their batteries even more compelling. But in June A123 did warn that the company might cease as a going concern, and finally in mid-August the company reached a rescue deal with Wanxiang, the Chinese autoparts maker, who would buy out A123. That deal was contingent on a list of conditions, and as recently as SEC filings yesterday was still in process. This morning, however, news was released that A123 is backing away from the Wanxiang deal and instead agreeing to a packaged bankruptcy and sale of technology and assets to Johnson Control.