After a long and bumpy road, battery-producer A123 Systems has officially filed for bankruptcy. This news comes immediately after word that the Waltham, Massachusetts-based company may not have enough cash to fund operations, or even seek bankruptcy protection. This news has ramifications elsewhere in the industry, as A123 had contracts with Fisker Automotive as well as with BMW.

In a press release issued this morning, A123 announced that it will sell off all automotive assets to Johnson Controls. A123 will file Chapter 11, while Johnson Controls will provide $72.5 million in debtor-in-possession financing. The aim of the financing is to support A123 while it attempts to pursue alternative business operations.

To anyone following the battery maker closely, this news should not come as a shock. It was estimated that A123 lost about $67 million dealing with a battery recall for the Fisker Karma. In May of this year, the company posted a $125 million net loss. Shares for A123 have fallen 85 percent this year as the company has posted 14 straight quarterly losses.

With news of the bankruptcy, it wouldn't be surprising if A123 were be brought up in tonight's presidential debate. A123 received $249 million in federal grant money in 2009. The company also received $100,000 in 2006 under the Bush Administration, and additional tax exemptions and credits during Mitt Romney's time as a Massachusetts governor, so this issue has many sides.

For Fisker, the issue at hand is finding a new battery supplier. Johnson Controls has had previous hybrid ventures and continues to explore lithium-ion batteries. This could be an opportunity for the Milwaukee-based company to expand that part of its business, perhaps replacing A123 as Fisker's battery supplier.
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A123 SYSTEMS REACHES AGREEMENT TO SELL AUTOMOTIVE BUSINESS ASSETS TO JOHNSON CONTROLS

-A123 and its U.S. Subsidiaries File Voluntary Chapter 11 Petitions To Facilitate Transaction Process
-Johnson Controls to Provide $72.5 Million in DIP Financing To Support A123's Continued Operations
-A123 Actively Pursuing Strategic Alternatives for Grid, Commercial, Government and other Businesses and Operations


WALTHAM, Mass., October 16, 2012 – A123 Systems, Inc. (Nasdaq: AONE) ("A123" or "the Company"), a developer and manufacturer of advanced Nanophosphate® lithium iron phosphate batteries and systems, today announced that it has entered into an asset purchase agreement with Johnson Controls, Inc. (NYSE: JCI) in a transaction valued at $125 million. Under the terms of the agreement, Johnson Controls plans to acquire A123's automotive business assets, including all of its automotive technology, products and customer contracts; its facilities in Livonia and Romulus, Michigan; its cathode powder manufacturing facilities in China, and A123's equity interest in Shanghai Advanced Traction Battery Systems Co., A123's joint venture with Shanghai Automotive. The asset purchase agreement also includes provisions through which Johnson Controls intends to license back to A123 certain technology for its grid, commercial and government businesses. A123 also continues to engage in active discussions regarding strategic alternatives for its grid, commercial, government and other operations, and has received several indications of interest for these businesses.

To facilitate the transaction process, A123 and all of its U.S. subsidiaries today filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. The Company's subsidiaries located outside the U.S. were not included in the filings. This action is expected to allow the Company to provide for an orderly sale of the automotive business assets and all other assets and business units under Section 363 of the Bankruptcy Code and enable the Company to maximize the value of its assets for its stakeholders in a controlled, court- supervised environment.

In conjunction with the proposed transaction, A123 has received a commitment from Johnson Controls for $72.5 million in "debtor in possession" financing to support the Company's continued operations during the pendency of the sale process. The Company has filed a number of customary motions seeking court authorization to continue to support its business operations during the transaction process, including the continued payment of employee wages, salaries and health benefits without interruption.

"We believe the asset purchase agreement with Johnson Controls, coupled with a Chapter 11 filing, is in the best interests of A123 and its stakeholders at this time," said David Vieau, Chief Executive Officer of A123. "We determined not to move forward with the previously announced Wanxiang agreement as a result of unanticipated and significant challenges to its completion. Since disclosing the Wanxiang agreement, we have simultaneously been evaluating contingencies, and we are pleased that Johnson Controls recognizes the inherent value of our automotive technology and automotive business assets. We are also pleased that we have received indications of interest that recognize the value of our grid and commercial businesses. We are encouraged by the significant interest we have received, as multiple parties have submitted proposals for these businesses. As we move through this transaction process, we expect to continue operating and working with customers and suppliers."

"Our interest in A123 Systems is consistent with our long-term growth strategies and overall commitment to the development of the advanced battery industry," said Alex Molinaroli, president, Johnson Controls Power Solutions. "Requirements for more energy efficient vehicles continue to increase, which is driving automotive manufacturers to pursue new technologies across a broad spectrum of powertrains and associated energy storage solutions. We believe that A123's automotive capabilities are a good complement to our existing portfolio and will further advance Johnson Controls' position as a market leader in this industry."

The transaction with Johnson Controls is being completed pursuant to Section 363 of the U.S. Bankruptcy Code and is subject to, among other things, higher or otherwise better offers to purchase any or substantially all assets of the Company, Court approval, antitrust approval, any other such approvals as may be required by law, and other customary conditions. Given these conditions, there can be no assurance that the proposed transaction will be consummated.

Additional information is available on A123's website at www.a123systems.com or by calling A123's Restructuring Hotline, toll-free in the U.S., at 1-800-224-7654. For calls originating outside the U.S., please dial +1 973-509-3190. Court documents and additional information can be found at a dedicated website administrated by the Company's Claims Agent, Logan & Company: www.loganandco.com.

Latham & Watkins LLP and Richards, Layton & Finger are serving as legal advisors, Lazard is serving as financial advisor, and Alvarez & Marsal is serving as restructuring advisor to A123.

About A123 Systems

A123 Systems, Inc. (Nasdaq: AONE) is a leading developer and manufacturer of advanced lithium-ion batteries and energy storage systems for transportation, electric grid and commercial applications. The company's proprietary Nanophosphate® lithium iron phosphate technology is built on novel nanoscale materials initially developed at the Massachusetts Institute of Technology and is designed to deliver high power and energy density, increased safety and extended life. A123 leverages breakthrough technology, high-quality manufacturing and expert systems integration capabilities to deliver innovative solutions that enable customers to bring next-generation products to market. For additional information please visit www.a123systems.com.

Safe Harbor Disclosure

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended that are subject to risks, uncertainties and other important factors, including statements with respect to the expected benefits of A123's proposed asset sale and financing transactions with Johnson Controls, the potential of the transactions and Chapter 11 filing to create value for A123 and its stakeholders, the satisfaction of conditions to closing of the transactions, the anticipated growth of the market for energy efficient vehicles, the expectation that a Chapter 11 filing will enable A123 to sell its automotive and other assets in an orderly manner and maximize value to its stakeholders, and the necessity of bankruptcy court and other approvals, including antitrust and other regulatory approvals, to conduct and complete the transactions and other potential asset sales. Among the factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: failure to obtain required bankruptcy court and other approvals, failure to satisfy the conditions to closing of the transactions, delays in the development of A123's products, adverse economic conditions in general and adverse economic conditions specifically affecting the markets in which A123 and Johnson Controls operate, and other risks detailed in A123 Systems' quarterly report on Form 10-Q for the quarter ended June 30, 2012 and other publicly available filings with the Securities and Exchange Commission. All forward-looking statements reflect A123's expectations only as of the date of this release and should not be relied upon as reflecting A123's views, expectations or beliefs at any date subsequent to the date of this release.


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  • 54 Comments
      scott3
      • 2 Years Ago
      It is too bad the goverment has pretty much killed NASA. They did more for technology and the maket than anyone. When they met the needs of the space program they were permitted to use the technology in other markets and other products vs force feeding the system. At least the companies had to work for it and meet program goals when they were working for NASA vs the funding that the engergy department just gives away with no accountability or follow up. I guess it is corperate welfare. I think the goverment needs to be involved with seeding new technologies but the system they have now sucks vs what we had in the 60's and 70's. Too many have lost sight that with the space program was not just about going to the moon but what we had to develope to get there. Why do you think China now has a space program?
      • 2 Years Ago
      [blocked]
        • 2 Years Ago
        [blocked]
          Zoom
          • 2 Years Ago
          If people are undecided they're really morons. The only voters who aren't morons who are supporting Rmoney are the top 0.1%. They're the only ones who will make out like bandits if Rmoney is in office. Everyone else is screwed.
          WillieD
          • 2 Years Ago
          Zoom, if you want anyone to take you seriously you might want to spell Romney's name correctly. Then again it does make it easy to see who the ignorant fools are.
        lasertekk
        • 2 Years Ago
        Nothing. Like the article states, Romney had a hand in their early years, and later in 2009, they received other help. Neither will bring it up is my bet.
      gop.hates.america
      • 2 Years Ago
      On nice, media taking cheap shots again at the president. Since we all suffer from incredibly short memories and inability to see things in perspective, let me help you a little. AFGHANISTAN WAR Cost: $4 Trillion (and counting) American lives lost: 2000 Return on Investment: None. When we eventually found and killed Bin Laden, all we needed were two choppers and a dozen navy seals. IRAQ WAR Cost: $3 Trillion + cost of supporting vets for rest of their lives American lives lost: 3000 Return on investment: None. WMDs never found BUSH TAX CUTS FOR "JOB CREATORS" Cost: $4 Trillion Return on investment: unemployment increased from 4% to 8% Investment in A123 Cost: $0.00025 Trillion Return on investment: Potential to be world leader in battery technology. American lives lost: 0
        midworken
        • 2 Years Ago
        @gop.hates.america
        My faith in humanity dwindles the more "thumbs up" you receive.
        Carma Racing
        • 2 Years Ago
        @gop.hates.america
        1) Any examination of the president's record shows either willful destruction or clueless leadership. 2) Tax cuts typically increase tax revenue. Research "Laffer Curve". We are past the point where increasing tax rates increase revenue. 3) The current miserable state of the US can be traced to democrat control. When was the last time republicans had control of both houses and the presidency, idiot?
      gop.hates.america
      • 2 Years Ago
      If A123 batteries had not received this grant, the money could have been used to fund the Afghanistan war for a whooping 12 hours.
        Mike
        • 2 Years Ago
        @gop.hates.america
        Yes. I can't believe that war monger president Obama decided to get us involve deeper in Afghanistan with the surge.
      Steven Bremer
      • 2 Years Ago
      Another Obama funded green engine company failing, what a shocker. This just goes to prove that governmental needs to stay out of the private sector.
        WillieD
        • 2 Years Ago
        @Steven Bremer
        It's not a green engine company, it's a battery company. It just happens to supply electric vehicles with batteries.
      gop.hates.america
      • 2 Years Ago
      I forgot the most interesting number: SALT LAKE CITY OLYMPICS CEO: Mitt Romney Romney begged congress to bailout the olympics and his buddy George Bush was happy to oblige. Cost: $350 milion Return on investment: None.
        David H
        • 2 Years Ago
        @gop.hates.america
        And just how did you qualify "return on investment"??? I would like to see your data.
          gop.hates.america
          • 2 Years Ago
          @David H
          ok. Let me put it this way - how many people are still working for the 2002 Salt Lake City Winter Olympics?
        Scr
        • 2 Years Ago
        @gop.hates.america
        After Romney came in and redid the budget and timeline, and hired some compitent people to mange it, the Salt Lake Olympics broke even on the books. That is not to mention the millions in vendor and supplier profits such a s airlines, hotels, restaurants and the like. Many of the venues are still there and are used by the community. WInter olympics always are better for that than the summer ones are as more of the structures can be resued.
      Slipstream
      • 2 Years Ago
      Well, I am SO shocked at this latest fiasco in Obama's "green energy" program.......and will there be any investigations by the Injustice Dept? Nope..... So sad.........and so criminal.
        gop.hates.america
        • 2 Years Ago
        @Slipstream
        Will there be an investigation into Romney's offshore accounts? Nope. Republicans would rather spend their energy denying minorities their voting rights. From what I have heard, Romney's offshore accounts have more money than the total grants received by A123. Shocking, isn't it?
          Carma Racing
          • 2 Years Ago
          @gop.hates.america
          1) You make the assumption that offshore accounts are illegal. They are not. 2) Republicans want voter ID to prevent illegal voting. You need an ID to get food stamps don't you? (You probably know) 3) The amount of money someone makes from business is not a concern. Taking taxpayer money at gunpoint and giving it to your campaign donors to piss away is a big concern. This is a perfect illustration of what utter imbeciles socialists are, and the snaky, dishonest way they operate.
          gop.hates.america
          • 2 Years Ago
          @gop.hates.america
          @ Carma Racing 1) Offshore accounts are legal, but not reporting that to IRS is illegal. That might be one of the reasons Romney is not releasing his tax returns. He probably had to pay IRS a big penalty in 2008-2009 and doesn't want voters to see it. 2) You are assuming that all minorities live on food stamps. In fact, if they did, they would all have IDs and republicans wouldn't be able to use voter ID laws to suppress the votes. Not to mention, in last one year, there have been only 10 (yes, ten) reported cases of illegal voting. That's 0.000000625% of the total number of voters. 3) Taking my tax dollars and gunpoint and using it to kill millions of innocent people in other countries is my concern. Taking my tax dollars and giving it to Haliburton to build roads in Afghanistan (which they never finished) is my concern. Taking my tax dollars and spending it to suppress my vote is my concern.
        Kuro Houou
        • 2 Years Ago
        @Slipstream
        Did you not read even Romney gave them tax breaks.. sometimes Republicans don't like the truth so they just skip over it :(
      ThucBiDza
      • 2 Years Ago
      The troubled battery-maker A123 has just filed for bankruptcy (and no, in this case bankruptcy is not equal with deleveraging) should not be news to anyone who has followed the US government subsidized trainwreck of a company (especially since as we updated yesterday it was known it would miss its bond payment today). Well actually I take that back. The bankruptcy may come as a surprise to the president. Recall that Obama called A123 Chief Executive Officer David Vieau and then-Michigan Governor Jennifer Granholm during a September 2010 event celebrating the opening of the plant in Livonia, Michigan, that the company received the U.S. grant to help build. Surprise and epic humiliation that is. "This is about the birth of an entire new industry in America -- an industry that’s going to be central to the next generation of cars," Obama said in the phone call, according to a transcript provided by the White House. "When folks lift up their hoods on the cars of the future, I want them to see engines and batteries that are stamped: Made in America." Needless to say if the car is a flaming Fisker Karma or Chevy Volt, the hoods may be too hot to lift but that's another story. Most importantly, it will come as a big loss to the firm's equity holders (who have already lost their entire investment so hardly a surprise) creditors, who will likely be wiped out almost entirely (listed below), but most importantly US taxpayers, who funded the firm not on one occasion as conventional wisdom will have it, but with four distinct Federal and State agency grants, as is highlighted in the first day motion affidavit by David Pyrstash in support of the Chapter 11 petition.
        msk8
        • 2 Years Ago
        @ThucBiDza
        Sorry to burst your happy bubble but the plant is still there now its owned by Milwaukee based Johnson Controls (larger company).
      Hampton
      • 2 Years Ago
      Another one that's declared banrupcy and made off with hundreds of millions by given to by Obama. Wonder how much made it s way back into campaign contributions!
        Kuro Houou
        • 2 Years Ago
        @Hampton
        I know, Romney probably got a lot seeing as he gave them tax breaks too.
      Andrew
      • 2 Years Ago
      No way Mitt would let this tidbit out of his grasp...
        • 2 Years Ago
        @Andrew
        [blocked]
          Zoom
          • 2 Years Ago
          And Obama can throw it right back in his face.
      Blakkar
      • 2 Years Ago
      A123 made the big mistake of dropping out of the non-vehicle consumer market. With all the other kinds of devices that would benefit by these batteries, A123 stupidly let easy and steady money get away. I can tell you one of the most commonly, frequently, and repeatedly sold items in a RC shop are the batteries. What some people don't know is A123 used to make Batteries for RC model at anywhere from $50-$250 a pack. Prices for the packs has held steady while capacities have grown since A123 quit that market. While their performance has improved in step with the rest of the market, while producing superior quality packs. Iron-Phosphate packs are the least fire prone by far, are ten times more durable (holding a charge and taking a hit), but are more expensive. I can go on. My point is, A123 was making the best batteries for purposes aside from Automobiles. Making batteries for the hobby, for consumer devices, and all else would have done A123 much better. Avoiding the Asians would have only attracted buyers when someone realizes "Hey! A123 Batteries are tougher, last longer, and don't catch fire? I want more!" In a time where, Americans struggle to find a good "Made in the USA" product, and these were among those, A123 would have been almost printing money. Instead A123 put all their eggs in one basket, a very small basket.
      • 2 Years Ago
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