Johnson Controls, an auto parts manufacturer, announced that it would step away from its position as the debtor-in-possession lender during the bankruptcy procedure for battery maker A123 Systems. This was to avoid delays in the proceedings.
The company is also trying to avoid premature legal problems with Chinese auto parts manufacturer Wanxiang Group Corp. that has challenged Johnson Controls’ role as the primary bidder for A123, which filed for bankruptcy protection earlier this month.
Johnson Controls Inc. agreed to buy A123’s automotive assets. The company said that its $125 million offer is still on the table and it plans to expand the offer to include A123’s government business that involves military contracts.
The Milwaukee-based company said that it maintains its stalking horse position in the bankruptcy process over Wanxiang and other competitors. It is still subject to court approval next month. The stalking horse bid is the initial bid in a court-supervised auction of a business. This allows a company selling its properties under bankruptcy protection from low-ball bids.
A123 Systems had struggled since its first day as a public company three years ago. Investors bid up its shares by 50 percent during its IPO. The company got a $249 million Department of Energy grant three years ago in the hopes that it would improve a battery industry in the United States. During that time, the US was far behind Korea and China. It bet on A123 to make the country competitive in the battery industry.
The technology that A123 Systems offered was ahead of its time. Consumers in the United States stayed away from the expensive electric cars in favor of gas-powered ones. Romney used the issue to attack Obama during the presidential campaign. The company posted an $83 million loss in the second quarter of the year. It has not posted a profit yet.