Wanxiang still has a shot for bankruptcy battery maker A123 Systems

Well the drama surrounding the sale of battery maker A123 Systems continues as The Wall Street Journal now reports that Wanxiang Group has stepped in to provide the so-called debtor-in-possession financing for the bankruptcy. Johnson Controls has not abandoned its offer for A123 Systems’ assets and we’re likely setting up a bidding war or potentially a splitting of the company as its automotive assets could be split from its grid energy assets.

Wanxiang’s initial deal to invest $465 million in exchange for an 80 percent stake faced an uphill battle as a political backlash ensued, with lawmakers angry that federal grant money that had been used to fund R&D would now end up benefiting a foreign corporation. A sale to Wanxiang would require approval by the Committee on Foreign Investment in the U.S.

The other company with a lot riding on the bankruptcy is Fisker, which uses A123 Systems as the sole provider of its EV batteries. A123 warranties the batteries in Fisker’s luxury sports cars and in court filings, Fisker says the value of those warranties is around a hundred million.

If the U.S. government could get past its understandable concerns about all the lost IP to a Chinese conglomerate, the most stable choice for A123’s employees and its customers is to allow the Wanxiang rescue deal to go through. But we might have to wait for some election politics to die down for that to happen.

A hearing on the auction procedures is slated for November 5th in U.S. Bankruptcy Court. Stay tuned.

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Adam Lesser

Analyst Gigaom Research

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