Battery Maker A123 Files For Bankruptcy Protection

The moves came one day after the company warned it likely would miss debt payments and could be headed for restructuring under Chapter 11. Auto parts maker Johnson Controls Inc. will buy the company’s automotive business for $125 million.

A123 supplied lithium ion batteries to be used for energy storage on several wind and solar power projects, including the 21 MW Auwahi wind project in Hawaii.

Short of cash and hurting from weak sales of electric cars, battery maker A123 Systems Inc. filed for bankruptcy protection on Tuesday and quickly sold its automotive assets.

A123 has struggled for several years as Americans have been slow to embrace electric cars. The company has yet to post a profit and lost $83 million in the second quarter. Just two months ago, A123 announced a $450 million lifeline from Chinese auto parts maker Wanxiang Group Corp., but A123 said in a statement that the deal has been scrapped.

The Chapter 11 filing is likely to spawn more criticism of the Obama administration’s funding of alternative energy companies. The lithium-ion battery maker received a $249 million grant from the Department of Energy in August 2009 to help it build U.S. factories. But such grants have been criticized by republicans, who say Obama wasted stimulus money on the companies. Critics point to Solyndra LLC, a politically connected and now-bankrupt solar power company, which left taxpayers on the hook for $528 million.

A123’s stock, which traded for more than $20 on the day of its initial public offering in 2009, fell to 6 cents in late morning trading. The stock closed Monday at 24 cents.

Using its federal stimulus grant, the company set up manufacturing operations in the Detroit suburbs of Livonia and Romulus, Mich. The company has contracts to make batteries for General Motors Co., BMW AG, Fisker Automotive and others.

Unlike a loan, the company’s $249 million government grant does not have to be repaid. A123 had to match the grant money as it was used. So far the company has drawn about $129 million of the grant, spokesman Dan Borgasano said Tuesday.

Johnson Controls will get A123’s automotive assets, including lithium-ion battery technology, products and customer contacts. It will also take over the factories in Michigan, cathode ray factories in China and an equity interest in a Chinese battery company.

A123 also said it is in talks to sell its grid, commercial, government and other operations that weren’t purchased by Johnson Controls.