Electric car battery maker A123 Systems has filed for bankruptcy in the US and plans to sell its automotive business to American rival Johnson Controls.
The new plan for the Chapter 11 firm scuppers a proposed rescue from a Chinese company, Wanxiang Group, which wanted to take an 80 per cent stake in A123 for $465m.
"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," chief exec David Vieau said in a canned statement.
"We determined not to move forward with the previously announced Wanxiang agreement as a result of unanticipated and significant challenges to its completion," he added.
Although Vieau kept the reasons for the deal's demise vague, it could be something to do with the political opposition to the agreement because it would be giving money and technology to China. US officials have become increasingly wary of having Chinese tech firms present on US soil, claiming that they would allow their government to cyber-spy on the US and nick American innovations.
Government officials were concerned about A123's contracts with the Department of Defense and also unhappy that billions of taxpayer dollars that came from President Barack Obama's stimulus programmes could end up going to China instead of going to the US and creating American jobs.
However, A123 was also in a bit of a hurry. A $2.8m debt payment came due yesterday, leaving the company in a sticky cash-flow situation and the Chinese deal would require approval from the Committee on Foreign Investment in the US, whereas the US deal can go straight through.
The agreement with Johnson Controls is significantly smaller, allowing the Milwaukee-based firm to nab its auto unit for $125m, subject to higher offers in its bankruptcy auction. ®