A123

UK-based specialty chemicals company Johnson Matthey has taken over the battery material business of Swiss chemicals company Clariant for $75m.

Clariant supplies lithium iron phosphate (LFP) cathode material to the lithium-ion battery sector for automotive and non-automotive applications.

Lithium battery manufacturer A123 Systems LLC (A123) has appointed Patrick Hurley as chief technology officer.

Hurley previously worked for power management company Johnson Controls’s power solutions business unit and was the industrial contact between Johnson Controls and the US Department of Energy’s research partnership, the Joint Center for Energy Storage.

The sale of A123’s automotive assets to Wanxiang Corporation has closed for US$256.6 million. An assurance has been made that Wanxiang America will continue to operate A123 as a wholly owned subsidiary, focussing upon making micro-hybrid batteries. 

Wanxiang America President Pin Ni, said:  “A123 is a company with exceptional talent and potential, Wanxiang America is committed to the long-term success and the continuance of its US operations.”

The US Department of Energy gave A123 a grant of US$249 million to build new plants in Michigan and create 3000 new jobs. Up until bankruptcy proceedings it had only spent $132 million and created 1300 jobs. This loan will only be repaid if A123 cannot fulfill the initial promises. 

Amid fears of US-taxpayer funded development going into the hands of a foreign company, federal approval for the sale had to be obtained. The defence and security contracts were sold to a small US-based pack maker called Navitas for US$2.2 million. By ensuring these contracts remained within the US reduced fears of security breaches if technology developed for US military was in the hands of a non-allied nation.

Navitas’s founder and COO Alan ElShafei said: "I don't want to say we're a savior on the government side, but that's kind of our role. There are some unique technologies we're acquiring that Wanxiang will not have access to."

The Chief Executive of A123, David Vieau, has left the company to “pursue other interests.”

A123 Systems has filed for bankruptcy following a turbulent year. The Massachusetts-based lithium-ion battery manufacturer that employs 2 500 has been struggling to keep its head above water following disappointing sales of electric vehicles and a costly recall back in March 2012.

Johnson Controls Incorporated will buy the automotive business assets from A123 in a deal worth US$125 million. This will provide the finance for the company during bankruptcy. The factory in Michigan is to remain open for the time being.

This latest news puts halt to the discussions for a rescue buy-out by Wanxiang Group Corporation in August. The US$465 million deal would have meant the Chinese corporation held an 80% share in A123 and four of the nine board seats. However certain conditions, including A123's liquidity falling below operational levels, were not met so only $22.5 million of the loan amount has been funded. These complications prompted the deal with Johnson Controls. The talks had sparked political debate because A123 had received a substantial amount of public funding from the Obama administration to boost the advanced battery industry in the USA and there was unrest about the company then falling to non-American ownership.  

A123 Systems has filed for Chapter 11 bankruptcy protection on 16 October 2012 due to its mounting financial problems. There will be a bankruptcy auction for assets. Johnson Controls has provided A123 with US$72.5 million in debtor-in-possession financing to fund the bankruptcy case.

The Michigan-based battery maker has suffered because the EV market has failed to take off as quickly as hoped, only accounting for 3% of US car sales last year. For the first half of 2012 it reported losses of US$ 208 million, this vulnerable position led to the talks with Wanxiang Corp.

The mounting financial problems came despite a cash injection of US$249 million in the form of federal grants from the Obama administration in 2009. 

The bankruptcy will add fuel to the US presidential debate as another example of an unsuccessful ‘green’ investment by the Obama administration. Following EnerDel, A123 is the second of the 30 battery and electric drive companies that received government funding to go bankrupt. Excess of US$1.2 billion has been provided for battery makers, including A123 and Johnson Controls, over the past three years to boost the hybrid and electric vehicle market. Of the money A123 received in federal grants, US$132 million has been spent on building a factory in Michigan.

A123 has suffered losses of US$857 million since the company began and was at risk of being delisted from the stock market because of consistently low stock value.