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Johnson Controls withdrew from A123 Systems bankruptcy auction

A123 Systems reaches agreement to sell substantially all assets to Wanxiang for $256.6M

A123 Systems, Inc. reached agreement on the terms of an asset purchase agreement with Wanxiang America Corporation through which Wanxiang would acquire substantially all of A123’s assets for $256.6 million. (Earlier post.) Wanxiang outbid a joint Johnson Controls and NEC offer and a bid from Siemens in an auction held on 6 December for the assets of the bankrupt Li-ion battery maker.

According to the terms of the asset purchase agreement, Wanxiang would acquire A123’s automotive, grid and commercial business assets, including all technology, products, customer contracts and US facilities in Michigan, Massachusetts and Missouri; its cathode powder manufacturing operations in China; and its equity interest in Shanghai Advanced Traction Battery Systems Co., A123’s joint venture with Shanghai Automotive.

Excluded from the asset purchase agreement with Wanxiang is A123’s Ann Arbor, Mich.-based government business, including all US military contracts, which would be acquired for $2.25 million by Navitas Systems, a Woodridge, Ill.-based provider of energy-enabled system solutions and energy storage products for commercial, industrial and government agency customers.

The completion of the sale to Wanxiang is subject to certain closing conditions, including approval from the Court as well as from the Committee for Foreign Investment in the United States (CIFIUS). Because the total purchase price for A123’s assets would be less than the total amount owed to creditors, the Company does not anticipate any recoveries for its current shareholders and believes its stock to have no value.

The agreement was reached following an auction conducted under the supervision of the United States Bankruptcy Court for the District of Delaware. A hearing at which A123 and Wanxiang will seek the required Court approval of the sale is scheduled for Tuesday, 11 December 2012.

As we had hoped, the auction process for A123’s assets was robust and competitive. We are pleased with the result of the auction and believe that the selected bids from Wanxiang and Navitas maximize the value of A123’s assets for the benefit of our stakeholders. We expect that the sale will be approved by the Court, at which time we plan to execute the separate asset purchase agreements with Wanxiang and Navitas.

We think we have structured this transaction to address potential national security concerns expressed during the review of our previous investment agreement with Wanxiang announced in August as well as to address concerns raised by the Department of Energy. We believe this transaction balances those risks with A123’s obligation to act in the best interest of our creditors.

—Dave Vieau, CEO of A123

Based in Chicago, Wanxiang America has been in the automotive and industrial markets in the US since 1994 and currently has more than 3,000 employees in the US. It is a subsidiary of Wanxiang Group, China’s largest automotive components manufacturer and one of China’s largest non-state-owned companies. A123 is Wanxiang’s fifth clean energy investment in the US in 2012.

We believe that A123’s industry-leading technology for vehicle electrification, grid energy storage and other industries complements Wanxiang’s strong R&D and manufacturing capabilities, so we think adding A123 to our portfolio of businesses strongly aligns with our strategy of investing in the automotive and cleantech industries in the US.

We plan to build on the engineering and manufacturing capabilities that A123 has established in the US and we are committed to making the long-term investments necessary for A123 to be successful.

—Pin Ni, president of Wanxiang America

Comments

CarCrazy

HarveyD .... There are good examples (at least in Power Electronics Industry) that US companies stay and manufacture in USA and very competitive all over the world (SynQor (MA, taxochussets) is one of them). It looks like that as long as big shots are not hurt by outsorcing it will continue. The normal way to go is to use highly automated production but ... USA and Canada do not have enough qualified work force. So, we are stuck with high paid unqualified work force trying to compete. In now a days of high unemployment there are tons of openings all over the country for high qualified people.
Trade wars are not necessary but equal trade conditions are. For some stupid reasons we open our markets while China, Korea, Japan and many others keep them closed even for us. China's currency is not floating and highly regulated by the government.
If we are stupid as a nation - so that is what we get.
This is my 5c

Bob Wallace

NPR just did a nice piece about manufacturers returning to the US. Labor costs in China are rising. China is developing its own internal market and the standard of living is rising as the number of low-pay workers is topping out.

Shipping costs are rising.

It takes longer to make design changes when the designers are not in the same building/same room with production.

And keeping production in-country helps protect trade and design secrets.

We intentionally let China be protectionist and allowed them other advantages such as government subsidies for manufacturing. That was needed to help them develop. They are now fairly well developed and it's time to level out the playing field.

We'll need to allow some African countries and some Middle Eastern countries advantages so that they can also create viable economies. That works better than handouts. It's the old "teach a man to fish" thing....

ToppaTom

"NPR just did a nice piece about manufacturers returning to the US., ,

I've heard this type of anecdotal BS over and over.

Now I hear that A123 could lose the rest of its $249 million grant. Boy do we have some sharp people in the government.

CarCrazy

ToppaTom...
"Boy do we have some sharp people in the government." - sounds like oxymoron. Sharp people - goverment are incompatible.
However, if gov. blocks this deal the company goes to Johnson Controls.

Bob Wallace

People sure buy into those right-wing talking points, regardless of how stupid the points might be....

HarveyD

The majority of USA's wealth came from its ability to mass produce goods at a lower price and flooding the world market with it, much the same way as China has been doing for the last 20 years or so. Wealth accumulation is quickly moving from USA-EU to China, Korea and soon to India.

Let's not forget that when US States side production became too costly, outsourcing to lower cost labor places, was used as early as 1950 and even before.

The expanding local US market, population and economy was enough to keep the local production facilities occupied at 95+% for decades.

The real squeeze started with the previous Administration created economic 'bust' in 2005/2006. The quick reduction in buying power forced the majority to switch to lower cost goods, often made in Asia (China, Korea, India etc). Local higher cost goods manufacturers lost their local (and export) markets and had to close or outsource their production to Asia to stay competitive and/or to survive.

Will this trend level off or be reversed when US-EU economies pull out of the current recession? Not so sure. It is not easy to move huge production facilities from Asia to US-EU, unless Asia's production cost rises sharply or enough to lose the current competitive edge.

HarveyD

A new trend is starting....using lower cost Chinese labor at home? A British Columbia (Canada) large coal mine is trying to use 200+ Chinese miners and paying them $15/hour less than local workers with less (or no) fringe benefits. Using imported labor could cost up to $25/hour less.

That has been done for years with farm labor from Mexico but this may be a first for miners.

The new Trans-Mountain pipelines and Pacific Ocean ports may be built with $$$, steel, machinery and labors from China.

Bob Wallace

Some jobs won't return, perhaps forever. Clothing assembly will keep moving from place to place around the world until all countries/regions have somewhat similar standards of living.

And then we will likely see automation replacing people at sewing machines. When that happens clothes will be sewn close to market by machine.

Other jobs we're seeing return. Apple is opening an assembly plant in the US. Car companies are already building here, even Chinese car companies are planning on US plants. A German wind turbine manufacturer just opened a turbine and blade factory in Arkansas.

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