Published August 09, 2012
A company that two years ago was one of the most promising U.S. innovators in the clean-fuel auto industry was rescued from collapse Wednesday. Its buyer: A Chinese auto-parts company.
Wanxiang Group Corp., one of China's biggest parts makers, offered a $450 million lifeline to A123 Systems Inc., a maker of advanced batteries for electric vehicles that received U.S.-government backing. The deal would put the firm's lithium-ion technology and its U.S.-funded manufacturing plant into the hands of a company that has slowly acquired a passel of auto assets across the Midwest.
Wanxiang's investment, part of a move into clean energy technologies, comes as Chinese firms are shaking up the global oil-and-gas industry with bold deals. Last month, state-owned Cnooc Ltd. offered $15.1 billion for a Canadian energy company, on the same day China Petrochemical Corp. offered to buy a stake in a U.K. oil company. Globally, Chinese firms have disclosed more than 1,400 acquisitions since January of 2008, says researcher Dealogic.
Waltham, Mass.-based A123's recent losses and a high-profile battery recall were a sharp reversal for a start-up that attracted big-name investors and a $2.6 billion market value just a few years ago. Its troubles show how hard it has become for the Obama administration to cultivate a U.S. supply base and market for electric-powered cars.
Sales of electric vehicles and plug-in hybrids in the U.S. remain a fraction of gasoline-powered vehicles because of their high cost, the lengthy recharging times required and limited availability of public charging stations. Three years ago, the administration set a goal of one million plug-ins on the road by 2015, a number that now seems wildly optimistic.
So far this year, Nissan Motor Co. has sold about 3,500 all-electric cars in the U.S. and General Motors Co. has sold about 10,700 of its battery-powered Volt-out of a total of eight million vehicles sold. Auto makers and governments have pushed the technology as a way to cut reliance on foreign oil, reduce greenhouse gases and encourage a new industry.
Hoping to kick-start an electric-vehicle battery industry, the U.S. provided $1.26 billion since 2009 to battery makers including Johnson Controls Inc., LG Chem Ltd., and Dow Kokam, a joint venture of Dow Chemical Co. and South Korea's Kokam Co., to set up nine factories in four U.S. states. Most are producing far fewer batteries than originally expected. Ener1 Inc., another government-grant recipient, sought Chapter 11 bankruptcy restructuring and has since emerged.
A123 was awarded $249 million in Department of Energy grants and has used about half so far to pay for some of the costs of building a factory in Livonia, Mich. It was among the earliest entrants in the field, opening its Michigan battery plant in 2010, and outlining plans for a second U.S. facility.