U.S. Electric Battery Company secures Chinese Bailout
- Published on Monday, 27 August 2012 02:41
A123 Systems, a maker of innovative electric car batteries, is located in Walton, Massachusetts and was facing financial failure as a result of a major recall of defective batteries.1 A123 had been seeking new investors for a number of months. The chief executive of A 123 Systems, David Vieau, indicated that they had found a new investor in Wanxiang, who is one of the largest auto suppliers in China.
Largely as a result of a recall of defective batteries, A123 Systens just reported a loss of $ 82.9 million in the second quarter, up from a loss of $55 million in the second quarter of the previous year. Wanxiang has agreed to provide $25 million immediately and, over time, a total of $465 million and take an 80% ownership interest. The deal will have to be approved by the Committee on Foreign Investment in Washington and by the Chinese Government. Under the agreement, Wanxiang would provide the bulk of these resources by buying debt and warrants that ultimately could be converted into an 80% ownership stake.
David Vieaux indicated that: “We have been hearing a lot of anxiety regarding Chinese ownership. The fact is their track record in the U.S. has been excellent”. Wanxiang owns a variety of manufacturing businesses in the US that employ a total of 3,000 workers. But the pending Chinese investment is still raising questions in Washington where two Republican senators sent a letter to Steven Chu, the energy secretary about the concerns that US Government resources would be benefiting a Chinese company. David Vieaux noted that the Chinese investment would help preserve 900 jobs at their Livonia plant in a suburb of Detroit.
Looks like a win-win all of the way around.
1 See previous story on Electric Car Batteries, 18 June 2012 under the category of electric cars