Electric vehicle battery maker A123 Systems filed for bankruptcy recently, and now a fight over the company’s assets is heating up. The Chinese firm Wanxiang Group Corp. has been circling for some time, and will now lend A123 Systems $50 million for continued operation, thus keeping the company from losing its value ahead of any bidding for its assets. This loan put Wanxiang in a more advantageous position to acquire A123 Systems, and this move has made some people nervous.
Wanxiang had originally offered, just a month ago, to buy an 80 percent stake in A123 Systems for a sum of $465 million, according to a report in The Wall Street Journal. This offer was blocked by lawmakers because A123 Systems had taken $132 million in federal grant money, and therefore couldn’t be simply handed over to a foreign company. This loan buys A123 Systems the time to secure federal approval of a Wanxiang buyout.
Among those hoping Wanxiang doesn’t get approval is Johnson Controls, who are also after A123 Systems’ assets, and had originally put in their own bid to offer a loan. But the most worried are the automakers who use A123 System’s batteries. These include GM and BMW, but it is Fisker with the biggest commitment. All of Fisker’s cars use batteries from A123 Systems, and with the fate of the battery maker unclear, Fisker is becoming increasingly unsure about their own future. Even if a new battery supplier could be found tomorrow, A123 Systems still has warranty obligations to Fisker estimated to be as much as $100 million. Fisker has a hard enough time as start-up automotive company, and with the loss of some $30 million worth of vehicles to hurricane Sandy, Fisker could really use a break when it comes to the question of batteries.
It’s unclear what exactly will happen to A123 Systems, but the loan from Wanxiang doesn’t look good for Fisker. The company could lose their battery supplier and also be on the line for millions in warranty obligations. It only remains to be seen if the makers of as beautiful a car as the Karma will be done in by another company’s inability to turn a profit.