If you're lithium-ion battery maker A123 Systems and have been through the public image ringer with the Fisker Karma battery pack recalls and an explosion at General Motors' Warren Tech Center, what do you do? After all, getting U.S. Dept. of Energy Grants, rolling out a resilient Nanophosphate EXT phosphate battery and signing a deal with Smith Electric Vehicles, can only get you so far. So, how about bringing in a Chinese investor? That is working pretty well for Volvo.

A123 Systems signed an agreement on August 8th with Wanxiang Group Corporation that could bring in a $450 million investment and give the large Chinese automotive components manufacturer an 80 percent ownership stake. The non-binding agreement with Wanxiang brings in needed cash flow and gives A123 Systems access to vehicle electrification and grid-scale energy storage in China.

Republican House of Representative Cliff Stearns questioned the safety of the agreement, writing in a statement that, "It appears the Department of Energy and the Obama administration have failed to secure sensitive taxpayer funded intellectual property from being transferred to a foreign adversary, which raises serious national security issues. ... There is definitely a growing concern about foreign- controlled or owned companies attempting to gain a foothold into our supply chain in the United States. We need to make sure the Federal government isn't an unwitting accomplice to the theft of our own national secrets by providing them with multimillion-dollar government grants and loans."

Making battery packs for electric vehicles is not an easy business to break into. Automakers tend to build them in-house or hire a veteran company like Panasonic. For battery companies, supplier contracts help, but are not a guarantee. Battery maker Ener1 found this out when the Norwegian carmaker Think stopped production of its Think City electric car at its Elkhart, IN, assembly plant. As for A123 Systems, it's been a rough ride, but things could be looking up.
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A123 Systems Announces Non-Binding Memorandum of Understanding With Wanxiang Group Corporation for Strategic Investment

WALTHAM, Mass., Aug. 8, 2012 (GLOBE NEWSWIRE) -- A123 Systems (Nasdaq:AONE), a developer and manufacturer of advanced Nanophosphate® lithium iron phosphate batteries and systems, today announced that it has signed a non-binding memorandum of understanding (MOU) with Wanxiang Group Corporation establishing the framework for a strategic investment through which Wanxiang would invest up to $450 million in A123. Wanxiang is China's largest automotive components manufacturer and one of China's largest non-government-owned companies. Wanxiang's proposed investment in A123 is intended to create the capital structure necessary for the company to continue growing its core businesses, and alignment with Wanxiang is also expected to substantially strengthen A123's access to the growing vehicle electrification and grid-scale energy storage markets in China. A123 will hold a conference call today at 8:00 a.m. ET to discuss this announcement as well as the company's financial results for the second quarter 2012.

"Today's announcement is the first step toward solidifying a strategic agreement that we believe would remove the uncertainty regarding A123's financial situation," said David Vieau, CEO of A123. "A substantial capital investment from Wanxiang would not only provide financial stability to A123 as we continue to grow, but it would also align us with a large, successful global brand in the automotive and cleantech industries. Wanxiang has a successful track record of operating in the U.S. with significant employment and commitment to good corporate citizenship, and we expect that a strategic agreement with Wanxiang would help enhance our competitive position in the global marketplace, especially in China."

Wanxiang Group Corporation and its related companies have more than $13 billion in revenue and more than 45,000 employees across its global businesses in equipment and automotive parts manufacturing, clean energy, financial services, agricultural products, natural resources and real estate, among others. Through its subsidiaries, including Wanxiang America Corporation, it has more than 3,000 U.S.-based employees.

"A123 offers industry-leading technology for vehicle electrification and grid-scale energy storage, as well as strong manufacturing and systems engineering capabilities in Michigan and Massachusetts. We think this creates important synergies with Wanxiang, which has been involved in this field for 12 years and has strong R&D and manufacturing capabilities in China, especially as we continue to expand on our strategy of investing in the automotive and cleantech industries in the U.S.," said Weiding Lu, CEO of Wanxiang Group. "This MOU is the first step toward a longer-term agreement through which we plan to build on the foundation A123 has established in the U.S. and help expand the company's capabilities both domestically and internationally, which we believe would create long-term value to the customers, investors and other stakeholders of both companies."

Under the proposed terms of the strategic agreement outlined in the MOU, Wanxiang would provide A123 with up to $75 million in initial debt financing under a Senior Secured Bridge Facility, with an initial credit extension of $25 million and $50 million to be funded after the satisfaction of certain closing conditions, and, subsequently, upon satisfaction of certain closing conditions, purchase $200 million aggregate principal amount of A123's Senior Secured Convertible Notes. The agreement would also include the potential for Wanxiang to invest up to an additional $175 million if it exercises the warrants that would be issued in connection with the Bridge Facility and the Convertible Notes for cash. Incurrence of the remaining $50 million of loans under the Senior Secured Bridge Facility would be subject to the satisfaction of certain approvals and conditions, including receipt of favorable determination from CFIUS and receipt of Chinese government approvals. Issuance of the Convertible Notes and the related warrants would also be subject to additional conditions, including approval from A123's shareholders, termination of the Hart-Scott-Rodino waiting period, the conversion or redemption of all the outstanding six percent Convertible Notes and relevant warrants and the repurchase or retirement of at least 90 percent of A123's outstanding 3.75 percent convertible subordinated notes due 2016.

According to the proposed terms of the strategic agreement, if the entire amount of the initial debt financing is provided to A123 and the full amount of the warrants and Convertible Notes are issued and exercised for cash, Wanxiang's total capital investment in A123 from these agreements would total approximately $450 million. The total amount of shares of A123's common stock issuable upon exercise and conversion of the warrants and Convertible Notes would represent approximately 80 percent of the then outstanding common stock of A123. While the MOU is non-binding and the execution of definitive documentation is subject to negotiation and, among other items, the amendment of agreements with certain of A123's existing lenders, A123 and Wanxiang are currently negotiating definitive documentation and intend to close the full transaction by the end of 2012. A123 cannot provide any assurance, however, that definitive documentation will be executed, or, if it is executed, that the conditions to funding the full investment will be fulfilled.

This press release shall not constitute an offer to sell nor a solicitation of an offer to buy any of these securities, nor shall there be any offer, solicitation or sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state.


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    • 1 Second Ago
  • 38 Comments
      HVH20
      • 1 Month Ago
      A123 manufactuer's 20Ah cells in Korea, those cells are sold through A123 dealers in low quantity for around $80/each. The Korean factory sells 19.9Ah cells out the back door to China, who sells them to the US for $15/each. Might as well just cut to the chase and make A123 a Chinese company because they are the only ones that will survive at that rate. This is the best senario IMHO since it was already happening. Its like solyndra being bought out by its undercutting chinese competition. If you want to start a conspiracy, these back door chinese cells under cut the competition to drive them into bankruptcy. At which point china could buy them up at a lower price, get rid of the competition then have a monopoly on the technology. Who looks like a fool now?
        brotherkenny4
        • 1 Month Ago
        @HVH20
        Please provide a source for the cells from China if you would. That's $250 kWh from the chinese and about $1300 per kWh from A123. I'd like to buy some of the Chinese cells. What's the difference in the warranty and any liability issues. Perhaps that's what your paying for from A123, a warranty and the right to sue them should you do something stupid and hurt yourself. Can Americans sue Chinese companies?
          HVH20
          • 1 Month Ago
          @brotherkenny4
          I hate to quote Jack, but he has a good write up on it here: http://blog.evtv.me/2012/02/obsessive-compulsive-disorder-and-a123-battery-cells/
        krona2k
        • 1 Month Ago
        @HVH20
        http://www.emissions-free.com/ This guy might be doing that, I considered getting an ebike battery pack from him but the connectors were not compatible.
      Levine Levine
      • 2 Years Ago
      Stop bitching about technology transfer, Cliff Stearn. Put your $450million where your mouth is.
      PR
      • 2 Years Ago
      If Clifford wants to put his money where his mouth is about "serious national security issues" then he would obviously want to put the appropriate amount of money forward for EV batteries that our national security would require to protect. Sadly, he's just wrapping himself in the "serious national security" flag as an excuse to oppose a program because it helps the green car movement, and he is notorious in his opposition to all things green.
        2 Wheeled Menace
        • 1 Month Ago
        @PR
        There is no security issue here at all, that is a load of bull. A123's battery tech is very outdated. No military operations even bother with these - they have batteries that are far superior now. They even have primary cells with 5-6 nominal voltages. They have secondary cells with twice the watt hours per kilogram. Oh, but this is politics. I forgot. You can make up anything you like and get away with it.
      porosavuporo
      • 2 Years Ago
      First Chinese demolished US solar industry and bought up the valuable pieces, battery tech is next up ? TBH with A123 product strategy it was kinda hard to see how they'd succeed.
        2 Wheeled Menace
        • 1 Month Ago
        @porosavuporo
        By demolished, you mean that they provided a product at a much better price. I believe A123 is better off in their hands. At least they will willingly sell products!
          Rotation
          • 1 Month Ago
          @2 Wheeled Menace
          Sure did. Government money subsidized the heck out of their PV plants and with this unfair advantage they crushed the US solar industry.
      • 2 Years Ago
      Wow. So does anyone know Chinese? I see how this mess is going.
      mustang_sallad
      • 2 Years Ago
      This guy is a joke, as if he would have allowed ANY kind of government support for A123.
      Rotation
      • 2 Years Ago
      Cliff Stearns crapped all over Solyndra, calling it government waste. Now he says we should spend money to make sure the US isn't losing the new technology race? Complete hypocrite. http://www.stearns.house.gov/news/stearns-statement-on-white-house-response-to-solyndra-investigation/
        EZEE
        • 1 Month Ago
        @Rotation
        Whereas if he supported a poorly run bankrupt organization, and supported the Chinese buying our stuff, he would be a great guy. Got it, thanks!
          Rotation
          • 1 Month Ago
          @EZEE
          Speak for yourself. Don't try to put words into my mouth.
          EZEE
          • 1 Month Ago
          @EZEE
          So..... Not to put words in your mouth, but saying solyndra was good, or bad, was wrong, and saying the Chinese investing is good, or bad....is wrong too? So...taking any position on the subject makes a person wrong? Just trying to get it all skraight.
      • 2 Years Ago
      "Calm the waters"?...is that what we're calling it?
        HVH20
        • 1 Month Ago
        I think they are calling it a $60k battery pack in a $30k car :)
      Ford Future
      • 2 Years Ago
      Hypocrite Republican liars, NOW concerned about US Tech Transfer, after the US has lost 50% of it's manufacturing base. Kissed Walmart Walton rear, and Koch rear for 30 years, SUDDENLY they're concerned about US tech. So the real truth here is, Republicans don't really give a damn about anything.
        2 Wheeled Menace
        • 1 Month Ago
        @Ford Future
        I'm not sure what this has to do with left-right politics. I've been watching A123 for years. The problem is that they have been a poor investment that did not live up to expectations.
          sirvixisvexed
          • 1 Month Ago
          @2 Wheeled Menace
          Stop it with your objective unclouded logical thinking! Republican oil money greed corporation!!!! Ahhh, that's better...
          Rotation
          • 1 Month Ago
          @2 Wheeled Menace
          Agreed, they appear to be poorly run and not able to compete in the battery market. The question is why does a politician who has been quick to throw other companies under the bus suddenly sees it as critical that we keep a non-competitive company afloat because of worries about being driven out of new technological markets. It just sounds like smary political hackery. As to what it has to do with left-right, the right has been most vocal about killing the DoE loan program.
        EZEE
        • 1 Month Ago
        @Ford Future
        Glen Beck Koch Brothers starving Rush Limbaugh anger hate NAZI blah blah blah.
      Spec
      • 2 Years Ago
      So when people advocate government support for green technology, it is derided as pie-in-the sky nonsense, a big waste of tax dollars, a pipe dream. But when a Chinese company then tries to buy a US company that has some of that green technology, it is suddenly "our own national secrets". LOL. Make up your mind.
        2 Wheeled Menace
        • 1 Month Ago
        @Spec
        Well, the green technology sector has earned the distinction of being a pie in the sky sector. It's not really unfounded. Tesla Motor co. is the only success ( by a loose definition ) i can point to, but to find dozens of high profile failures is not difficult. Also, the government has pumped a lot of our money into A123. Of course we expect to get something out of our investment. Are you conditioned to the idea that government shouldn't provide you a service in return for the money you give them? i hope not. The bailout of the banks and GM / Chrysler was awful, but TARP funds are being repaid. Do you think we'll get the money back from all the 'green tech' companies?
          EZEE
          • 1 Month Ago
          @2 Wheeled Menace
          2 wheel.... Results do not matter, only intentions. War on poverty a miserable failure, with rates the same as when it started? Meh. Destruction of the lack family unit? Meh. The intentions were good, and of we just put a little more money into failed efforts, only THEN will they work. Look at it like this... The holiest of holies! Social security - cant even think of changing that, even though it was started when you had a guy play a piano next to a movie screen, and even though it is beyond bankrupt (due to a well meaning democrat saying we could spend the trust fund and replace the money with IOU's). The intentions were good, so that is all that matters.
          2 Wheeled Menace
          • 1 Month Ago
          @2 Wheeled Menace
          Ezee, those are more complex topics that are outside of the scope of this site ;) But yes, failures of government are not hard to find. Unlike the private sector, we cannot fire the government and get a better one. Unfortunate!
      brotherkenny4
      • 2 Years Ago
      For those of us that want EVs to be successful, this is a good thing. It's true that China will get the profits, but there was plenty of opportunity for Americans to invest. They did not, so what's the problem? I suppose everyone is worried that China will make money and the Americans will look stupid. I'd say we don't need wanxiang to make money for us to look stupid. We do that pretty well already. So Tweaker, what are we handing over to the Chinese? That thing that everyone said was a waste of our tax payer dollars? Do you not see the disconnect in reality. He, the republican said the green energy stuff was a waste of tax payer dollars. Now he's angry because the Chinese don't think it is, and where willing to put $450million in to prove it. By the way, you all do know that the grant to build the factory requires a 50% share from the recipient and that the factory be built in the US. So not only are the Chinese investing in the technology, they are investing in creating jobs for Americans. Quite the opposite of the American investers. Maybe that is what the republicans are really mad about. This might actually decrease unemployment and make what the democrats did work. I'll bet the GOP would have preferred the total failure of A123. Thanks for supporting America and American jobs GOP.
      Roy_H
      • 1 Month Ago
      "Making battery packs for electric vehicles is not an easy business to break into. Automakers tend to build them in-house or hire a veteran company like Panasonic." Interesting statement. For the "Automakers tend to build them in-house" part... Mercedes-Benz and Nissan are the only companies that I know of who build their own batteries (and the M-B doesn't make EVs yet so in-house manufacturing is not confirmed). The "or hire a veteran company like Panasonic." part applies to Tesla, Toyota, Mitsubishi, GM and Ford. VW has signed agreements with just about every known battery manufacturer in the world. So the key word here is "veteran". Part of the problem here is how many years does a company have to be in the battery business to be called "veteran"? A123 has been around for a while now, and has been successfully selling small battery packs for several years most for B-K power tools. Besides their contract with Fisker, they also have a contract with GM for the up-coming Spark EV. They are the only relatively new company to have contracts with major players I know of. So yes, it is not an easy business to break in to, but A123 has succeeded. For this very reason, I believe it is in the best interest of the US government to rescue A123 and preserve their investment in this company that has had some high-publicity setbacks, but is on the whole a very viable company with a bright future.
        DB
        • 1 Month Ago
        @Roy_H
        Toyota has a twofold strategy for Li-Ion; build some in-house (Primearth) and buy some from their partners (Panasonic-Sanyo). What makes things more interested is that Primearth was started as JV between Toyota and Panasonic. Toyota took controlling share (80%) from Panasonic in 2010 so that Panasonic could buy Sanyo. Right now Primeath makes the Li-Ion batteries for the Prius Alpha whereas Sanyo makes the batteries for the Prius Plugin: http://techon.nikkeibp.co.jp/english/NEWS_EN/20110516/191786/ Toyota has been using its own Li-Ion batteries in low volume production vehicles since 2003: http://techon.nikkeibp.co.jp/english/NEWS_EN/20100127/179665/
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