Friday, August 17, 2012

A123 Systems, Inc. (NASDAQ:AONE) Gets Rescue Package from Chinese Firm, Provokes Storm Against Obama Administration

It's China to the rescue. Battery maker A123 Systems, Inc. (NASDAQ:AONE) has got a rescue package worth $465 million from Chinese auto parts maker Wanxiang Group Corp.

The cash-strapped manufacturer of batteries for electric and hybrid cards said that the cash infusion would help it continue with its operations, which looked to be in jeopardy in July. That time the company had said it was left with cash that would last for only 5 months.

A123 said that the rescue fund included an initial line of credit worth $25 million that would be received this week and could be immediately deployed for its urgent use.

The remaining part of the money would be given in the form of convertible notes and bridge finance with attached warrants.

The battery maker said in a statement that if all the warrants and notes are converted to shares, then the Chinese company will end up owning about 80 percent in the American company.

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The infusion of funds from a Chinese firm has predictably raised a storm in the Obama administration.

Two Republican senators have questioned whether A123 should continue to receive funds from the U.S. government in light of this bailout package from China.

A123 was awarded a $249 million grant by the Energy Department in 2009 under a program to expand U.S. battery manufacturing for electric and hybrid cars. The company so far has received about half of the funds.

The government was also accused of allowing a potential transfer of sensitive technology to a country that is seen as its chief trade and economic rival.

Shares in A123 fell 2.2 percent to close at 47 cents on Thursday. The company has been hurt by excess capacity ad weakening demand in the United States for electric cars.

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