A123 Systems
The business, the turning points, and the decisions behind them.
01 / WHAT IT BUILT
What the company did
A123 Systems was an American battery manufacturer founded in 2001 as a spin-off from MIT. Based in Waltham, Massachusetts, it made lithium iron phosphate batteries for electric vehicles - most notably supplying Fisker Automotive - as well as for grid storage and commercial applications. Backed by a $249 million US Department of Energy grant and $125 million in Michigan incentives, it built battery plants in Livonia and Romulus, Michigan.
02 / A123 Systems FAILURE REASONS
Failure reasons
A123 was brought down by a market that never materialized and a devastating product failure. The large electric-vehicle market it had bet on arrived far slower than expected, leaving the company burning cash on factories built for demand that did not exist. A 2012 recall scandal - defective battery packs that shut down Fisker Karmas, including during Consumer Reports testing - forced A123 to suspend production at its Livonia plant and spend $51.6 million replacing Karma batteries plus $15.2 million for other customers. With $376 million in debt, the company defaulted on a $75 million loan from China's Wanxiang Group after a proposed $465 million rescue investment was blocked amid congressional opposition to a foreign takeover of taxpayer-funded technology.
03 / EVENT HISTORY
Events in the structured record
- Battery recall crisis
Defective battery packs cause Fisker Karma shutdowns, including during Consumer Reports testing; A123 suspends production at its Livonia, Michigan plant and spends $51.6 million replacing Karma batteries and $15.2 million replacing other customers' batteries.
- Chapter 11 bankruptcy
In October 2012, A123 files for Chapter 11 bankruptcy protection in Delaware, listing $376 million in debt against $459.8 million in assets, after defaulting on a $75 million Wanxiang loan; a proposed $465 million Wanxiang rescue investment had been blocked amid congressional opposition.
- Asset auction
In December 2012, Wanxiang Group's US unit wins the court-approved bankruptcy auction for A123's automotive, grid, and commercial assets for $256.6 million, beating Johnson Controls' $125 million stalking-horse bid; CFIUS approves the sale in January 2013, while the government battery business goes to Navitas Systems for about $2.25 million.
04 / CONTEMPORARY REBUILD ASSESSMENT
Difficulty of rebuilding this project today
Material for this section is being gathered and checked. It will appear here once ready.
Overall assessment: Not completed
05 / CAUSAL CHAIN
How the factors connect
- 01
In October 2012, A123 Systems filed for Chapter 11 bankruptcy protection in Delaware, listing $376 million in debt against $459.8 million in assets.
- 02
In December 2012, Wanxiang Group's US unit won the court-approved bankruptcy auction for A123's automotive, grid, and commercial assets for $256.6 million, beating Johnson Controls' $125 million stalking-horse bid; CFIUS approved the sale in January 2013.
- 03
A123's government and military battery business was sold separately to Navitas Systems for about $2.25 million.