Electric-car battery maker A123 Systems files for bankruptcy

WASHINGTON — Exposing President Obama to further criticism of his administration's economic policies, a leading electric-car battery maker that received a large federal grant filed for bankruptcy protection and said it was selling its auto-business assets.

A123 Systems Inc., a company built with innovative MIT-developed technology and a $249-million grant under Obama's 2009 economic stimulus program, said Tuesday that it signed a deal to sell its two Michigan manufacturing plants and some other assets to Johnson Controls Inc. in a deal valued at $125 million.

A123's announcement, coming on the day of the second presidential debate, could be seized by Republican challenger Mitt Romney to further his attacks on the administration's stimulus and, in particular, its use of federal dollars to help certain companies as a boost to green technology.

Another advanced-battery maker that received a federal grant, Ener1, filed for bankruptcy protection this year. And Obama took considerable heat after the demise of Solyndra, a solar company that lost $527 million in government money.

Two Republican senators immediately pounced on the news.

"A123 is yet another example of President Obama gambling with taxpayer dollars and picking winners and losers in the green energy world," said Sen. John Thune of South Dakota, who joined with fellow Republican Sen. Chuck Grassley of Iowa in issuing statements questioning whether the Energy Department had done adequate due diligence before making the grant.

The Energy Department, in a memo Tuesday that seemed to anticipate renewed criticism, said the advanced-battery market was continuing to expand significantly in the U.S. and around the world and that A123's sale will enable it to remain a vital part of the industry in America.

"Four years ago, virtually all advanced vehicle batteries were built overseas, and it looked like the United States might miss out on this enormously important, rapidly expanding market," the memo said in explaining why the Energy Department began making investments to jump-start the industry.

The memo said the department, with bipartisan support, awarded $2 billion in grants to 29 companies to build or retool manufacturing facilities for advanced-battery manufacturers and other companies making parts for electric cars.

As for A123 and its promising lithium-ion technology, the memo said, the company has a long history of having garnered bipartisan support.

The Chapter 11 filing by A123, based in Waltham, Mass., came a day after it said it couldn't make a $2.8-million interest payment to bondholders due Monday.

In August, the company struck a deal for a $75-million loan with an American subsidiary of Chinese auto-parts giant Wanxiang Group, but A123's chief executive, David Vieau, said Tuesday that there were "unanticipated and significant challenges to its completion."


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