A123 Becomes Chinese - Faster Than Imagined

Bertel Schmitt
by Bertel Schmitt
a123 becomes chinese faster than imagined

Troubled battery maker A123 is getting another lifeline. This time, from China. Wanxiang Group will invest as much as $450 million in the company, says Reuters. Wanxiang, one of the largest Chinese auto component makers. A123 will soon be Chinese.

A123, which received a $249 million grant from the Obama administration as part of a program to develop advanced lithium-ion batteries, said last month that it only had four or five months until its money would run out. A123, which had big plans for the EV industry, reported a second-quarter net loss of $82.9 million on $17 million revenues. Does not sound like the best business. Wanxiang seems to have a different perspective. Says the Wall Street Journal:

“The proposed agreement includes plans for Wanxiang to obtain convertible notes and warrants that if fully exercised could give it an 80% stake in A123. The deal is expected to close by year’s end.”

When we reported about AS123’s cash crunch, TTAC correspondent Jellodyne said:

“Romney would have closed ‘em down, sold the parts (to overseas companies) and bought the batteries from China. That’s just good business sense.”

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7 of 16 comments
  • Redmondjp Redmondjp on Aug 08, 2012

    Methinks they are buying into this to obtain the IP, with offshoring of the manufacturing to occur within a couple of years. Just another step in the global race to the bottom.

    • See 2 previous
    • Luke42 Luke42 on Aug 09, 2012

      @highdesertcat Indeed. Not saying I like it, but it is a sensible move by the Chinese.

  • Robert.Walter Robert.Walter on Aug 08, 2012

    We had business dealings with the Wanxiang Group about 10 years ago ... this was not one of my projects, so I am not deep in the details ... we were considering using them for metal-forming work in China as a supplier of sub-components for our assembly work there (and possibly for export to some of our other international locations) ... part of the deal would have been - can you believe it!? - that we would show them certain techniques to improve the quality and profitability of production ... basically help them up their game dramatically ... one quality responsible colleague paid a visit there to evaluate their capability ... he recalled seeing a huge room in their HQ lobby dedicated to the history of the group, showing how they had, in a few short decades, transformed themselves from a garage operation to a major automotive component supplier within China. His summary: "at the rate they are going, and the rate we are going, they will own us in about 10 years ..." This has not yet come to pass, but I still see it as possible with good probability ... but in the meantime, they have bought up quite a few US-based automotive assets.

  • Ranwhenparked Ranwhenparked on Aug 08, 2012

    This is a reason why its always risky trying to artificially create winners and losers. All the free money in the work can't magically make an unsound business model work, it just prolongs the inevitable. A123 can't survive without a wealthy sugar daddy there to prop it up and hold its hand for a very long time, and it may have just found one (at least for as long as it takes for Wanxiang to get whatever IP they want out of it, or lose patience with continuing losses, whichever comes first).

  • Carbiz Carbiz on Aug 08, 2012

    ... start learning to say, "Would you like fries with that," in Mandarin.