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China's Wanxiang rescues A123 Systems
Source: Agencies |
August 22, 2012, Wednesday
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STRUGGLING US battery maker A123 Systems, which received a US$249 million green technology grant from the Obama administration, got a US$465 million lifeline from Chinese auto-parts maker Wanxiang Group Corp.
Hangzhou, Zhejiang Province-based Wanxiang will own 80 percent of Massachusetts-based A123, if all the warrants and notes are later converted to shares, A123 said in a statement on Thursday.
A123's rescue will give one of China's largest non-government companies a controlling interest. The advanced car battery industry has been hurt in part by too much capacity and weak US demand for electric cars.
As part of the 2009 American Recovery and Reinvestment Act's Electric Drive Vehicle Battery and Component Manufacturing Initiative, A123 was awarded a grant of US$249.1 million. A123 promised to create 38,000 US jobs, including 5,900 at its own plants. A123 said on Thursday it has more than 1,200 workers. Since it got the grant money, A123 added nearly 1,000 workers.
David Vieau, A123's chief executive, said in a statement on Thursday that the company "believes that we will continue to expand on our strong manufacturing and systems engineering capabilities in Michigan and Massachusetts."
A123 spokesman Dan Borgasano said that Wanxiang has "expressed verbally their commitment to our US operations, and their intention on building on our operations." He said it may include adding jobs to A123's existing US plants.
Borgasano said it expects Wanxiang to help A123 gain business around the world, and particularly in China. A123 already makes automotive batteries for three vehicles of the Roewe brand owned by SAIC Motor Corp.
Wanxiang, which had annual revenue of more than US$13 billion in 2011, has more than 45,000 employees globally and supplies auto parts to many of China's largest automakers.
Borgasano said it was too early to say whether the current A123 management including Vieau will eventually be replaced. Once Wanxiang takes over a controlling interest in A123, four of the nine seats on A123's board will be filled by Wanxiang appointees, he said.
For now, he said, nothing will change in how the company is run.
Electric vehicle and hybrid sales for the first seven months of the year totaled 270,000 in the US, representing only 3 percent of total US car sales, according to the green-car website Hybridcars.com.
A123 Systems said the planned investment includes an initial credit extension of US$25 million that it had expected to receive last week. The rest will come through a mix of convertible notes and bridge financing with warrants, as certain conditions are met.
The line of credit would help A123 keep making batteries for electric and hybrid cars as well as for power storage. In July, the company said it was left with only five months of cash.
The agreement follows the non-binding memorandum of understanding that A123 signed earlier this month. The announced investment of US$465 million is up from the US$450 million when the non-binding agreement became public.
In 2011, A123 had revenue of US$139 million, 60 percent of which was from its transportation business of supplying batteries for both passenger and commercial vehicles, 27 percent from its large-utility power grid business, and the remainder on commercial applications like backup data storage.
The company has said this year's revenue will be in a range between US$145 million and US$175 million.
Eventually, A123 expects that power grid energy storage will make up half its sales. Current grid customers include three major utility companies: Edison International, AES Corp and Sempra Energy. Among A123's auto customers are General Motors, BMW, SAIC Motor, Tata Motors and Smith Electric Vehicles.
Hangzhou, Zhejiang Province-based Wanxiang will own 80 percent of Massachusetts-based A123, if all the warrants and notes are later converted to shares, A123 said in a statement on Thursday.
A123's rescue will give one of China's largest non-government companies a controlling interest. The advanced car battery industry has been hurt in part by too much capacity and weak US demand for electric cars.
As part of the 2009 American Recovery and Reinvestment Act's Electric Drive Vehicle Battery and Component Manufacturing Initiative, A123 was awarded a grant of US$249.1 million. A123 promised to create 38,000 US jobs, including 5,900 at its own plants. A123 said on Thursday it has more than 1,200 workers. Since it got the grant money, A123 added nearly 1,000 workers.
David Vieau, A123's chief executive, said in a statement on Thursday that the company "believes that we will continue to expand on our strong manufacturing and systems engineering capabilities in Michigan and Massachusetts."
A123 spokesman Dan Borgasano said that Wanxiang has "expressed verbally their commitment to our US operations, and their intention on building on our operations." He said it may include adding jobs to A123's existing US plants.
Borgasano said it expects Wanxiang to help A123 gain business around the world, and particularly in China. A123 already makes automotive batteries for three vehicles of the Roewe brand owned by SAIC Motor Corp.
Wanxiang, which had annual revenue of more than US$13 billion in 2011, has more than 45,000 employees globally and supplies auto parts to many of China's largest automakers.
Borgasano said it was too early to say whether the current A123 management including Vieau will eventually be replaced. Once Wanxiang takes over a controlling interest in A123, four of the nine seats on A123's board will be filled by Wanxiang appointees, he said.
For now, he said, nothing will change in how the company is run.
Electric vehicle and hybrid sales for the first seven months of the year totaled 270,000 in the US, representing only 3 percent of total US car sales, according to the green-car website Hybridcars.com.
A123 Systems said the planned investment includes an initial credit extension of US$25 million that it had expected to receive last week. The rest will come through a mix of convertible notes and bridge financing with warrants, as certain conditions are met.
The line of credit would help A123 keep making batteries for electric and hybrid cars as well as for power storage. In July, the company said it was left with only five months of cash.
The agreement follows the non-binding memorandum of understanding that A123 signed earlier this month. The announced investment of US$465 million is up from the US$450 million when the non-binding agreement became public.
In 2011, A123 had revenue of US$139 million, 60 percent of which was from its transportation business of supplying batteries for both passenger and commercial vehicles, 27 percent from its large-utility power grid business, and the remainder on commercial applications like backup data storage.
The company has said this year's revenue will be in a range between US$145 million and US$175 million.
Eventually, A123 expects that power grid energy storage will make up half its sales. Current grid customers include three major utility companies: Edison International, AES Corp and Sempra Energy. Among A123's auto customers are General Motors, BMW, SAIC Motor, Tata Motors and Smith Electric Vehicles.
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