Econintersect: Most of us are old enough to remember Linda Blair’s head spinning around in the Exorcist. The bankruptcy of A123 Systems, and the contradictory data being shoveled in the media – most people’s head should be spinning. The following is information which has been checked and verified.
According to BankruptcyData.com:
A123 Systems and two affiliated Debtors filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead number 12-12859. The Company, which designs, develops, manufactures and sells advanced re-chargeable lithium-ion batteries and battery systems, is represented by Mark D. Collins of Richards Layton & Finger and D.J. Baker of Latham & Watkins. The Company also announced that it has entered into an asset purchase agreement with Johnson Controls in a transaction valued at $125 million.
The reason for the bankruptcy was best described by gas2.org – and had little to do with bad management.
A123 Systems provides batteries for numerous electric vehicles, among them the Fisker Karma and the Th!nk City. Alas, these (and other) electric vehicles sold in such low volumes that A123 has not been able to turn a single dime of profit, and one-off vehicles that run A123 batteries like the KillaCycle aren’t going to keep the company alive.
Perhaps what hurt A123 the most though was losing the contract to provide batteries for the Chevy Volt. While A123 was slated to provide batteries for the Chevy Spark EV, GM has yet to comment on how the bankruptcy filings will affect that deal.
It has been widely reported that A123 Systems was awarded a $249 Million grant by the U.S. Government under the Recovery Act of 2009 (aka the Obama Stimulus). However, this is not exactly true as shown on the government website recovery.gov. A123 Systems received 2 awards totaling $279,013,083. Further, it has been reported that the government payments under these awards totaled $129,529,710 – however, additional payments totaling $ 2,594,370 were made under the second award.
|Project Title||Award Amount|
|Vertically integrated mass production of automotive class lithium ion batteries||$249,090,000|
|Tehachapi Wind Energy Storage Project||$29,923,083|
The Tehachapi Wind Energy Storage Project (TSP) is led by SCE. A123 Systems and the California Independent System Operator (CAISO) are project participants. SCE, a subsidiary of Edison International (EIX), is an investor owned utility operating in the State of California, covering over 50,000 square miles and serving over 13 million people with an energy portfolio that includes 12.6 billion kWh of renewable energy. SCE has over twenty years experience in large scale wind generation integration and in the development and testing of battery technologies for grid applications.
Some of the media has been implying that the government money paid to A123 Systems by the government went down the drain. The Christian Science Monitor has properly reported in part:
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.
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.