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A123 Systems has filled for Chapter 11 bankruptcy

A123 Systems, the Detroit-based battery developer and manufacturer has filled Chapter 11 bankruptcy, despite it receiving federal grants to the amount of $249 million – of which it used $129 million to date. The company has said that the voluntary petitions for reorganization were filed in order to facilitate the sale of its automotive business assets to JCI – Johnson Controls Inc. – however, the petitions do not include A123 Systems’ overseas subsidiaries.

The agreement states that JCI will pay $125 million in order to purchase A123’s automotive technology, products, customer contracts, the two Michigan plants, the cathode powder facilities in China as well as A123’s stake in Shanghai Advanced Traction Battery Systems Co – that looks like a pretty good deal.

The contract also features several provisions for Johnson Controls to license back some technology to A123, for the latter to use in its grid, commercial and government business. The company CEO considered that the agreement with Johnson Controls, combined with the Chapter 11 filing, is in the best interest of A123’s stakeholders.

The decision to sell to Johnson Control was made after a potential deal with Chinese Wanxiang company to purchase eighty percent stake in A123 fell through.

It is interesting to note that the contract features also a pledge from Johnson Controls to keep A123 financed so that it will operate normally till the transaction is completed.

As far as Johnson Controls Power Solutions goes, they have shown great interest in A123’s assets, saying that they are consistent with their own long-term strategies for growth; the recently acquired automotive capabilities being a good compliment for Johnson’s existing portfolio.

A123 Systems still has several contracts with automakers to supply them with batteries for their electric and hybrid cars, such as GM for their Chevrolet Spark EV, the Fisker Karma and the BMW Group.

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