Will A123 system be get bankruptcy protection?







A123 Systems is a public company engaged in manufacturing of advanced Lithium-ion batteries and battery systems for transportation, electric grid and commercial markets. With the history which talks about series of unsuccessful achievement of the company despite giving protection, the question that arises at present is, whether the company needs to be given another set of protection of their right and this time in the area of Bankruptcy? Till what extent will it prove to be successful?

History states that company had received a $249million from Department of Energy grant, 3 years ago, which was aimed at helping US battery industry prosper like never before. At this time US was far behind in their approach to become a prosperous battery industry in comparison with world leaders Korea and China. But however the technology provided by them came in no handy as the price of the new battery operated electric cars were higher than that of the gas-powered one and American were choosy when it came to purchase of costly cars as many models have limited range and the battery power can run out of power on longer trips. Further, the company sold its automotive unit parts to Johnson Controls Inc. and made a deal with them to keep A123 Plants open and then sell the company’s lithium-ion battery technology. A123 had later joined hands with solar panel makers, Solyndra LLC, with whom the government grant of money failed to achieve the required target. Solyndra are now faced to meet a debt of $528 million which they had borrowed from government as loan. A123’s winding up as an independent business is yet another downfall the company is facing with respect to its electric-car industry. Technology was one area where the company failed to cope with due to which their stock prices fell even further in 2009. John Controls is said to undertake A123’s Michigan factories, lithium ion-battery technology by paying $125 million, cathode ray factories in China, equity interest in a Chinese battery. Martin Zimmerman, former Ford executive, said that, dealing with electrics will lead to shooting up costs while manufacturing and this doesn’t make any financial sense when efficient gas powered cars are present in the market.

Looking over to the positive side it can be said that A123 expects to continue sale operations with Johnson Controls and sell its grid, commercial, government and other operations, which haven’t been purchased by Johnson Controls. The company further supplies batteries for the new Chevrolet Spark and BMW AG.

However objections were raised by the Republicans stating that the Obama administration is merely wasting millions of taxpayers’ dollars on alternative energy companies like A123, which prove to be unsuccessful in its attempt to meet the required ends.

The justification given by A123 systems on why they require such a protection is that, due to financial constraints cropping up, the business requires more finance to survive in the competitive market. It was said and announced that a Chinese auto parts maker Waxing Group Corporation had furnished a $450million to the company as lifeline but late this Tuesday, the deal was said to be revoked.

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