Johnson Controls isn't taking the bankruptcy sale of A123 Systems to the Chinese company Wanxiang lying down. Wanxiang won the bankruptcy court sale for $256 million on December 11 and, today, Johnson Controls has filed an appeal against the sale because it "objects to delay in payment of break-up fee and expense reimbursement."

Basically, A123 owed Johnson Controls (JCI) money (under something called a "stalking horse agreement" which is probably less fun than it sounds) and JCI now says that it should get this unspecified amount of money because it is entitled to do so. The money was put into escrow because there were questions about JCI lobbying against the Wanxiang sale. JCI contends the "activities of Johnson Controls' representatives involving public officials are consistent with First Amendment rights to free speech and are strictly governed by the company's ethics policy and comply with government regulations." Some members of Congress are wondering if the A123 sale will reveal trade secrets to the Chinese.

Alex Molinaroli, Johnson Controls Power Solutions president, said in a statement that, "Johnson Controls remains open to considering future opportunities to acquire relevant portions of A123's assets, keeping this critically important technology in the United States, preserving jobs and furthering the purpose of the American Reinvestment and Recovery Act," should the Wanxiang sale not go through. JCI says it, "shares concerns that have been voiced by members of Congress and other interested parties."
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Johnson Controls files appeal of A123 bankruptcy sale
Company objects to delay in payment of break-up fee and expense reimbursement


MILWAUKEE, Dec. 17, 2012 /PRNewswire/ -- Johnson Controls filed an appeal in bankruptcy court today of the Dec. 11, 2012 sale order approving Wanxiang's purchase of A123 Systems. As part of the sale order, the court ordered the escrow of the break-up fee and expense reimbursement due to the company under its stalking horse agreement with A123. Johnson Controls is appealing the sale order to obtain the breakup fee and expense reimbursement to which it is entitled under that agreement and which were previously approved by the bankruptcy court.

"We appreciated the opportunity to serve as stalking horse, which resulted in significant value to the estate, creditors and employees," said Alex Molinaroli , president, Johnson Controls Power Solutions.

A123 was directed to place the breakup fee and expense reimbursement in escrow after A123's creditors' committee suggested to the court that Johnson Controls was lobbying against the sale of A123 to Wanxiang.

"As a market leader and major employer with significant operations in the United States, we have expertise and insights regarding the industries we serve, which are important resources for leaders and decision makers. Our representatives regularly provide educational material and expert opinions on many topics including advanced batteries, lithium-ion technology and the various applications they serve," said Molinaroli.

Johnson Controls maintains an active government relations function that involves regular interaction with policy makers and agencies on the full range of issues relevant to the company. The activities of Johnson Controls' representatives involving public officials are consistent with First Amendment rights to free speech and are strictly governed by the company's ethics policy and comply with government regulations.

The significant issue of U.S. regulatory approval required for any sale of A123 to Wanxiang has been a constant challenge dating back to Wanxiang's original failed attempt to acquire A123 earlier in 2012 prior to bankruptcy. Johnson Controls has consistently maintained that national security questions tied to the core technology used in all of A123's businesses represent a risk to the sale which cannot be dismissed until resolved by the government review process.

Johnson Controls shares concerns that have been voiced by members of Congress and other interested parties and therefore will continue to monitor this process.

"Should the sale of A123 Systems to Wanxiang not be completed for any reason, Johnson Controls remains open to considering future opportunities to acquire relevant portions of A123's assets, keeping this critically important technology in the United States, preserving jobs and furthering the purpose of the American Reinvestment and Recovery Act," said Molinaroli.
About Johnson Controls

Johnson Controls is a global diversified technology and industrial leader serving customers in more than 150 countries. Our 170,000 employees create quality products, services and solutions to optimize energy and operational efficiencies of buildings; lead-acid automotive batteries and advanced batteries for hybrid and electric vehicles; and interior systems for automobiles. Our commitment to sustainability dates back to our roots in 1885, with the invention of the first electric room thermostat. Through our growth strategies and by increasing market share we are committed to delivering value to shareholders and making our customers successful. In 2012, Corporate Responsibility Magazine recognized Johnson Controls as the #5 company in its annual "100 Best Corporate Citizens" list. For additional information, please visit http://www.johnsoncontrols.com.

About Johnson Controls Power Solutions

Johnson Controls Power Solutions is the global leader in lead-acid automotive batteries and advanced batteries for Start-Stop, hybrid and electric vehicles. Our 50 manufacturing, recycling and distribution centers supply more than one-third of the world's lead-acid batteries to major automakers and aftermarket retailers. Through our innovations we are building the advanced battery industry for hybrid and electric vehicles. We were the first company in the world to produce lithium-ion batteries for mass-production hybrid vehicles. Our commitment to sustainability is evidenced by our world-class technology, manufacturing and recycling capabilities.


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    • 1 Second Ago
  • 27 Comments
      masteraq
      • 5 Hours Ago
      If Johnson Controls wanted to buy A123, then it should have made a higher bid.
      2 wheeled menace
      • 5 Hours Ago
      I hate to be unpatriotic like this, but i feel that this company would be better off in the hands of the Chinese. They have the resources, low liabilities, low regulations, industrial capacity, and machinery to produce these batteries already. We don't have that. here. Cheap, safe, and easy to purchase nanophosphate lithium batteries would be the best thing to happen to electric vehicles. We know that China can produce these at a lower cost than the USA and Korea plants could. Even Panasonic is producing some of their batteries in China now.
        brotherkenny4
        • 5 Hours Ago
        @2 wheeled menace
        Johnson Controls has plants all over the world, including China and quite a few in Mexico. So, patriotism may not be necessary. I am pretty sure they will do whatever looks like the most money, and not even think about the US, or the people of the US or the future of the US. I suspect the only time they think about any of that is when they are seeking special favor from politicians. JCI is Ford, GM, and Chrysler like. Their patriotism is a function of their advertising campaigns. Whatever it takes to get the morons to buy stuff.
          EZEE
          • 5 Hours Ago
          @brotherkenny4
          I own a Ford Ranger. I am a moron... (all together) "Hi Moron!"
        Letstakeawalk
        • 5 Hours Ago
        @2 wheeled menace
        Wanxiang has promised to keep A123 factories and workers here in the US. Indeed, Wanxiang is already a major American-Made supplier of parts to the US auto industry. JC, OTOH, wouldn't promise to keep the factory running. "Despite the concern about China snatching American technology, the Chinese company slated to buy Waltham battery maker A123 Systems Inc. has been a fixture in US manufacturing for two decades, building a base in the Midwest and saving thousands of old-line factory jobs at a time when local businesses were folding. Wanxiang America Corp., the North American arm of a Chinese conglomerate, owns several auto parts factories in the United States, and provides parts for one out of three cars manufactured in America. It is a major property owner in the Midwest, leasing to Walgreens drugstores among other businesses, and its growing presence in the alternative energy business includes a large stake in GreatPoint Energy of Cambridge. Supporters say Wanxiang is a model corporate citizen in its American communities. Its Chinese executive sent his children to local public schools, and the company finances exchange programs to China for local students. Moreover, they said its investments have preserved American jobs in the heartland. “If we can’t work with a company that has the extraordinary track record of Wanxiang, then who can we work with?” asked William Kirby, who wrote a case study of Wanxiang for Harvard Business School, where he is the Spangler Family professor of business administration. “Their core business remains manufacturing, and if we say we want to preserve manufacturing in this country, this is one way of doing it — through international partnerships.” http://www.bostonglobe.com/business/2012/12/13/new-chinese-owner-has-american-roots/E5Pxs7EsocCsnJiVwyqFjN/story.html
          Rotation
          • 5 Hours Ago
          @Letstakeawalk
          Talk is cheap. A promise to keep plants open means nothing. Ask Kraft/Cadbury.
          2 wheeled menace
          • 5 Hours Ago
          @Letstakeawalk
          That's hilarious LTAW. Now i don't know what the hell to think.
        Actionable Mango
        • 5 Hours Ago
        @2 wheeled menace
        I agree. With sweatshop-like conditions for their disposable child workers and the ability to pollute the air and water as much as they like, China is much more likely to be able to make a profitable company from this.
        EZEE
        • 5 Hours Ago
        @2 wheeled menace
        Let me be liberal for just a second. Resources...cool. Low liability...cool. Industrial Capacity, cool. But... Low Regulations? That scares me a little bit. We aren't talking about getting 25 permits to build a wooden fence in my backyard, we are looking at a battery plant. Although I maybe liberarian/right winger on many things, we are looking at a battery plant. Chemicals....by products.... think about the CFL's we use now - containing Mercury. We couldn't produce them here, so we move the plant to China - less regulations yay! Except...Mercury...workers...exposure....death.... The chinese won't let us see what happens at or around the plant, if it is bad...but who do you trust on this one? This is one case where a few regulations may not be such a bad thing....
          2 wheeled menace
          • 5 Hours Ago
          @EZEE
          China is where we were at in the early 1900's, with all the labor and pollution issues that come with it. No American company has successfully ran a lithium battery plant for long. Livonia, Michigan produced a bunch of dud cells at a higher cost. Meanwhile the rest of the world's batteries are made in China, Korea or Japan at this point. 100%-95% of the computer you're typing on is made in China. Let's be honest with ourselves here, we collectively don't want to be 1900's America and haven't intelligently figured ways around the pollution and labor issues. Until then, China is going to dominate manufacturing. Fix your team or go with the winning one, otherwise you're going to lose.
      Val
      • 5 Hours Ago
      If JCI really think A123 has CRITICALLY important technology, why not offer DOUBLE the estimated price? They knew what was going to cost, their bid almost matches the chinese, who apparently also did their homework. So a company with 40 bn in revenue couldn't dole out 500 mil for this CRITICAL technology that is a matter of national security? Really?
      Marcopolo
      • 5 Hours Ago
      Bankruptcy proceedings are always unhappy affairs. Potential buyers seek to buy the remaining assets as economically as possible. As an old US corporation, JCI has every right to complain about a US asset, funded largely by US taxpayers, and upon which many US suppliers (and customers) rely , being sold to a foreign owned corporation. JCI spent time and money in ensuring that the bidding process was competitive, and seeks a return on it's investment which yielded a higher return to investors. The bankruptcy court allowed a 'stalking horse arrangement' . Although most PRC corporations are little more than fronts for State (or Party ) owned, organizations intent only on technology transfer back to the PRC, the Wanxiang Group appears to be as reputable as it's founder. Wanxiang has a good history of compliance with local business ethical and legal standards as a multinational corporation. There is no reason to believe that Wanxiang will not continue US manufacture, but those who demand cheaper batteries, should also consider the human and environmental costs involved in batteries produced in nations with third world manufacturing conditions.
      EZEE
      • 5 Hours Ago
      Hmmmmmm. Johnson Controls sounds like a good idea to own A123, but, after a republican expressed concern about a Chinese company owning A123, we learned that the Chinese buying it would be the best thing for America, and that by expressing concern, that the republican simply wanted to express concern to starve children old people streets, rush Limbaugh glen beck Republican Party. Of course maybe today we are at war with east Asia, so this might be double plus good.
        MTN RANGER
        • 5 Hours Ago
        @EZEE
        Regardless of the politics, I feel JCI is a better fit for A123.
          EZEE
          • 5 Hours Ago
          @MTN RANGER
          Oh yes...all fun aside, it would be nice. Don't get me wrong, more electrics the better, regardless of where they are from, but rather the USA has them.
      Letstakeawalk
      • 5 Hours Ago
      Interesting article: "Wanxiang is seeking A123's battery technology, used in Fisker Automotive Inc.'s Karma sedan, as China pushes its companies to develop electric vehicles. An earlier accord with the Chinese company was scrapped in October, when A123 said it filed for bankruptcy protection and agreed to sell its automotive assets to Johnson Controls. "The purchase of A123 would automatically vault Wanxiang to become probably the No. 1 battery maker in China," said Shu Sun, a Beijing-based analyst at Bloomberg New Energy Finance. "Technology-wise, no battery company in China is likely to match A123's products in performance and reliability." A123 supplies electric-car batteries to a dozen customers, according Bloomberg New Energy Finance estimates. That's the highest number of clients in the industry, though LG Chem Ltd. and NEC Corp.'s venture with Leaf-maker Nissan Motor Co. have higher volume sales, Sun said." http://www.crainsdetroit.com/article/20121210/NEWS01/121219996/wanxiang-outbids-johnson-controls-for-most-of-a123s-assets
        Val
        • 5 Hours Ago
        @Letstakeawalk
        when 10 of those 12 customers probably make less than 100 cars per year, they should maybe rethink their business strategy.
          Val
          • 5 Hours Ago
          @Val
          It is however a surprise that hey have a factory, in fact multiple factories, with mass-market capacity, but no customers to sell to.
          Letstakeawalk
          • 5 Hours Ago
          @Val
          It should be no surprise that the highest-performance and most-reliable batteries currently available are a little too expensive still for mass-market vehicles.
      rcumor
      • 5 Hours Ago
      If a republican is involved the secret is already in the hands of the china goverment...! they love to ship all our product manufacturing overseas....!
      Doug
      • 5 Hours Ago
      Feels like JCI is using the Chinese as the boogeyman here. If they wanted A123, why didn't they come up with a better bid?
      Levine Levine
      • 5 Hours Ago
      Instead of out bidding Wanxiang at US bankruptcy court, Johnson Control low balled and failed. Having failed, it now resorts to blocking the sale through political manuevering, lobbying, propaganda ........ and most likely "political contributions," under the guise of 1st Amendment protection. Talk about unfair dirty business dealing! Johnson Control claims A123's critical battery technology should remain in USA as if A123 holds a top-secret national security technology. If that were the case, the NSC and the Pentagon would have already filed as Interveners in Federal Court for an injunction. The US government action has neither filed for any injunction nor voiced intention to do so . As for Johnson Control's claim of keeping and promoting jobs in USA, it is an empty one at best, a red herring at worse. In the past as in the present, Johnson Control does not even manufacture all of its numerous products in USA, and there is no assurance Johnson Control will keep A123 in USA. Essentially, Johnson Control's appeal to patriotism or nationalism is a cheap shot aimed at gullible Americans. AndJohn Control did not admit there is no evidence that Wanxiang will ship the entire A123 facility outside of USA. In order to avoid a Cram-Down upon the creditors whom A123 owes nearly hundreds of millions of dollar, US bankruptcy court seeks to recover as much money through the sales of A123 assets. A highest winning bid is in the best interest of these creditors. Low-ball bidder Johnson Control conveniently withholds this piece of information from the public, instead, appeals to the emotionally charged topic of "keeping jobs in America" during the current recession. If some of these creditors are not paid, it is conceivable they may lay-off workers or go bankrupt themselves. Johnson Control's Alex Molinaroli is showing his halo: a dirty, rotten, filthy ugly American businessman with no sense of telling the truth or a bit of conscience. He has done a disservice to Johnson Control to a large extent, and to a smaller extent, the image of American business.
        Rotation
        • 5 Hours Ago
        @Levine Levine
        The Johnson Control's bidder was not low-ball. It was within 1% of the winning bid. And with the Wanxiang win, A123 had to give up DoE loans that they would have kept under JC. These loans amounts to 20x the difference between the two bids. I don't really understand how the Wanxiang bid was selected.
          Val
          • 5 Hours Ago
          @Rotation
          And I don't understand why JCI didn't overbid by a huge margin, knowing thy will get the remainder of the DoE loan as soon before the ink is dry on the papers.
        Marcopolo
        • 5 Hours Ago
        @Levine Levine
        @ Levine Levine " Alex Molinaroli is showing his halo: a dirty, rotten, filthy ugly American businessman with no sense of telling the truth or a bit of conscience. " Every country has misanthropes and quislings, whose self-loathing and impotent resentment causes them to hate their country. In every post you display your irrational hatred for everything American. In the words of the late Phil Oches, "levine levine, find yourself another nation to be part of...... ! "
        • 5 Hours Ago
        @Levine Levine
        You might try actually doing some research before characterizing a company or its leaders. Alex Molinaroli has a good track record at a good company that is considered fair to its employees while still being innovative. Stalking horse bids are commonplace in bankruptcy sales; there is no reason not to honor the express terms of the breakup fees. Moreover, while we are dealing with restructuring of an American company, in the US bankruptcy courts, it is perfectly reasonable to favor the competitive bid of a U.S. based company that in fact keeps jobs in this country. As for the trade secrets issues, Chinese businesses have been notorious for stealing trade secrets. It's myopic to think that we don't need to aggressively protect US interests in intellectual property.
      Sergey
      • 5 Hours Ago
      You seem to be a good lawyer and know a lot about appeals. On the legal forum of Attorney Online we started a discussion about what are appeals http://attorney-online.info/forum/13-70-1 Please join the discussion and express your opinion. Moreover you can write there articles and posts to Attorney Blog. If you know many good attorneys, you can invite them to submit their contacts to Attorney Directory. It is free and lifetime. If you know interesting legal news, you can also publish them.
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