Wanxiang Won't Gut A123
Chinese Auto-Parts Maker Would Keep Plants, Hire Staff
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By PATRICK FITZGERALD
Wanxiang America Corp., the Chinese-owned auto parts company looking to acquire assets of advanced battery-maker A123 Systems Inc. AONEQ 0.00% in bankruptcy court, said it would employ the firm's U.S. workers and plants if its bid is accepted.
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Fabrizio Costantini for the Wall Street Journal
A123 Systems workers installed terminals onto an electric-car battery module at a Livonia, Mich., plant.
Wanxiang America, which bidding alongside Milwaukee's Johnson Controls Inc. JCI +3.75% and others, said its offer would best preserve the "integrity" of the battery maker and the jobs of A123's 2,400 employees.
"Wanxiang has a long history as a technology and automotive company, operating in the United States to ensure plants remain productive and local U.S. employees keep their jobs," said Pin Ni, Wanxiang America's president, in a letter to A123 Chief Executive David Vieauthat appears designed to appease congressional critics.
Representatives of A123 and Johnson Controls declined to comment.
An auction for A123's assets will be held Dec. 6 at the Chicago office of Latham & Watkins, the law firm that is representing A123 in its Chapter 11 case. Given the complexity of the business and the level of interest in the battery maker, the auction could last several days, according to an A123 adviser.
Lawyers for electronics makers Siemens AG, SIE.XE +0.45% of Germany, and NEC Corp., 6701.TO 0.00% of Japan, have indicated they were interested in bidding on the Waltham, Mass.-based company's assets.
A123, which was awarded a nearly $250 million grant from the U.S. government in 2009 to build a factory in Michigan, filed for Chapter 11 bankruptcy last month. The battery maker has so far drawn down about $132 million of the federal grant.
Sen. Chuck Grassley (R., Iowa) said in a statement that it remains unclear whether the acquirer of A123's assets could continue to tap the federal grant for expansion. "There are more questions than answers about what will happen to A123's grant," he said. "The U.S. Department of Energy needs to answer these questions."
Wanxiang, a unit of China's Wanxiang Group, is eager to buy the lithium ion battery maker despite having been left at the altar earlier this year when a $465 million deal collapsed. The Chinese auto-parts maker has offered about $131 million for A123's assets, excluding its government business, according to a person familiar with the Wanxiang proposal.
Johnson Controls separately offered $125 million for the company's auto assets when it filed for bankruptcy.
Sens. Grassley and John Thune have raised concerns in recent months that Wanxiang could gain access to the company's defense contracts and technology. A123 was the recipient of several multimillion-dollar contracts with the U.S. military. Any sale to Wanxiang would need approval from the Committee on Foreign Investment in the United States, which reviews deals that could result in the control of a U.S. business by a foreign person or company.
In his letter, Mr. Ni emphasized Wanxiang wasn't interested in A123's government business, including the military contracts, in an effort to address the national security concerns.
He also looked to stem the China-bashing that accompanied Wanxiang's earlier offer. More than half of Wanxiang's 6,000 global employees are based in the U.S., mostly in the Midwest, and one of every three vehicles made in America contained parts made by one of Wanxiang's units, he said.
"I am proud to say that Wanxiang was directly responsible for saving about 3,500 jobs between 2007 and 2009 during the auto crisis," Mr. Ni wrote.
Among those that could favor a purchase of A123 by Wanxiang include some of the battery maker's biggest customers, including Fisker Automotive Inc., whose $100,000 luxury plug-in hybrid is powered by A123 batteries. Tony Posawatz, Fisker's chief executive, believes Wanxiang is a natural to buy the A123 assets.
"We think Wanxiang is very serious about being a leader in this space," Mr. Posawatz said in an interview Monday.
Judge Kevin Carey of the U.S. Bankruptcy Court in Wilmington, Del., has scheduled a Dec. 11 hearing to review the auction results.
A123's Oct. 16 bankruptcy filing represented a blow to the Obama administration's efforts to nurture the market for electric vehicles and develop a ready supply of advanced batteries.
In addition to the Department of Energy grant and the Massachusetts loan, Michigan awarded A123 about $16 million in grants and loans, plus tax credits worth more than $125 million. Despite posting revenue gains in recent years, A123 has been bleeding red ink since 2001. In the past five years, the company has lost $877.7 million, including a loss of $269 million through August.
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