In its battle to stave off bankruptcy, electric car battery maker A123 Systems has found out what analysts have said for some time: all roads lead to China.
The Waltham company -- which received a $5 million loan from Gov. Deval Patrick's Clean Energy Center two years ago -- yesterday announced it would be bailed out by China's largest auto parts manufacturer, Wanxiang Group. The company is investing up to $450 million in A123 in a deal that will give Wanxiang 80 percent ownership of A123 stock by about 2018.
"The dynamics are that the Chinese market seems to present a big opportunity," said Michael Lew, green energy analyst at Needham & Co. "Eighty-percent of this company is going to the Chinese, which are accumulating more technology cheaply."
But the flip side, said Lew, "is that it gives them a lifeline."
Though stockholders will see significant dilution of their stake in A123 as the result of a deal, it will effectively save the company from a collapse that was seen as inevitable. A123, which grew out of technology developed at MIT, made clear in federal filings last month that it only had enough cash to support five months of operations.
The one-time "green energy" darling also landed $100 million in tax credits from Michigan to build a factory in Livonia, where President Obama stopped two years ago for a photo op.
Solar panel maker Solyndra filed for bankruptcy protection in September 2011 after receiving $535 million in taxpayer-funded loans.
A123 still has a contract with General Motors, and the Chinese investment will ensure that its Michigan plant remains open for at least several years, analysts said.
The stock reacted well on the news.
But the jump to 58 cents was relative, still a fraction of its 12-month high of $5 in September 2011. A mass recall scandal involving defective batteries cost the company at least $55 million in the spring.
Revenue fell short of Wall Street expectations in the second quarter, down 53 percent from last year to $17 million, company officials said yesterday. It was the fifth straight quarter of shrinking margins.
"We believe we've taken an important step here toward stabilizing the financial situation," A123 CEO David Vieau said in an earnings call yesterday. "And that the pipeline of customer demand remains healthy."
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