A123 Electric Car Battery Plants Saved From Bankruptcy By Auto-Parts Maker

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Lithium Ion Phosphate Auto Battery cell

Lithium Ion Phosphate Auto Battery cell

Despite filing for bankruptcy protection yesterday, lithium-ion battery firm A123 Systems has said the factories where it makes electric car battery cells will be saved, thanks to a $125 million deal with automotive parts maker Johnson Controls. 

Already a huge Tier One global automotive parts supplier, Johnson Controls sells around 120 million lead-acid starter batteries a year to the automotive industry, as well as everything from instrument panels and information displays to headliners and floor consoles.

The purchase of A123 Systems’ automotive business by Johnson Controls will not only give the auto-parts maker the chance to build and sell lithium-ion batteries to automakers, but hopes to safeguard two of A123 System’s battery facilities in the U.S. 

Alongside the two U.S. factories--located in Livonia and Romulus, Michigan--the deal will also see Johnson Controls obtain A123’s cathode powder plant in China, as well as equity interest in a joint venture with Shanghai Automotive Industry Corp.

In addition to the $125 million acquisition, Johnson Controls will provide A123 Systems with $72.5 million to continue its operations at those two battery facilities, ensuring production of electric car batteries can continue. 

Back in 2009, A123 Systems was awarded a $249 Million grant by the U.S. Government under the Recovery Act of 2009.

A123 Systems Employees Perform Quality Check on a Lithium-Ion Battery Pack [source: A123 Systems]

A123 Systems Employees Perform Quality Check on a Lithium-Ion Battery Pack [source: A123 Systems]

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The money--which had to be matched dollar for dollar by private A123 investment--was granted to A123 Systems to help create jobs, support the economy, and bring large-scale automotive lithium ion battery pack manufacturing to the U.S. for the first time.

Up to the moment of its bankruptcy filing, A123 Systems had used just $123 million of the available grant money. 

Just to be clear, unlike the low-interest loans made available to automakers like Ford, Nissan, General Motors and Tesla Motors under the Department of Energy’s Advanced Technology Vehicle Manufacturing Program, the money made available to A123 Systems was a grant, not a loan. 

This means the $123 million used by the firm so far--plus $6 million granted to it by the Bush Administration--has, and never will, require repayment.

“A123, which has been building batteries for electric vehicles as well as the nation’s power grid, quickly established itself as an innovative player in the market,” wrote Dan Leistikow, Director of the Office of Public Affairs at the Department of Energy, in a formal response to the news

“Today’s news means that A123’s manufacturing facilities and technology will continue to be a vital part of America’s advanced battery industry,” he continued.

Perhaps most importantly, however, Johnson Controls’ acquisition of A123 Systems’ automotive arm means that A123’s clients--including Fisker Automotive, BMW, and General Motors--will be able to continue  planned production without delays. 

This means GM’s all-electric car project, the all-electric Chevrolet Spark, will not be delayed. 

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