A123 seeks bankruptcy as battery maker runs short of cash
WILMINGTON, Del. (Bloomberg) -- A123Systems Inc., a maker of rechargeable lithium-ion batteries for electric cars, filed for bankruptcy after failing to make a debt payment that was due Monday.
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, Del. Chapter 11 is the section of the Bankruptcy Code used by companies to reorganize.
A123 didn’t expect to be on time with an interest payment due Monday on $143.8 million of notes expiring in 2016, or to make a payment due Monday on $2.76 million in outstanding 6 percent notes, the Waltham, Mass.-based company said Monday in a regulatory filing.
"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 in the filing. "No assurance can be given that the company will be able to avoid restructuring, reorganization, or a bankruptcy filing."
A123, which received a $249.1 million federal grant in 2009 to build a U.S. factory, needed a financial lifeline after struggling with the cost of a recall of batteries for Fisker Automotive Inc., 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 an majority ownership stake.
Wanxiang plans to invest as much as $465 million in A123, giving the Hangzhou, China-based company a stake of about 80 percent, A123 said in August.
In Monday'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.
The possibility of A123 filing bankruptcy fuels further political debate over government financing of alternative-energy and transportation businesses.
Federal grants and loans to companies including A123, Fisker 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.
A123 has posted at least 14 straight quarterly losses. Its shares have fallen 85 percent so far this year to 24 cents at Monday's close in New York.
President Barack Obama called A123 CEO David Vieau and then-Michigan Gov. Jennifer Granholm during a September 2010 event celebrating the opening of the plant in Livonia, Mich., 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.Contact Automotive News