A123 Got U.S. Financing on Day of Bankruptcy

Battery maker A123 Systems Inc. received a $947,000 grant payment from the Dept. of Energy on Oct. 16, the day it filed for Chapter 11 protection from creditors.

The lithium-ion battery maker told a Congressional panel about the money last week. The funds were part of a $249 million "green" energy grant from the DOE. A123. The DOE notes that it only reimburses grant recipients for work they have already completed.

Republicans in the U.S. House of Representatives who began investigating the program after several grant recipients failed called the grant payment "disturbing."

The company's financial troubles were no secret in the months before bankruptcy. A123 warned in May that it faced collapse without external financing. The company agreed in August to sell 80% of its equity to China's Wanxiang Group.

Wanxiang is now vying with Milwaukee-based Johnson Controls Inc. to buy at least some of the battery maker's assets during a Dec. 6 court-monitored auction.

Separately, A123 disclosed to securities regulators that a federal bankruptcy judge approved its request to pay bonuses to 10 key executives who agree to remain while company assets are sold. The judge trimmed by 12.5% the proposed payments of as much as $4.2 million, which amounted to 70% to 100% of the employees' annual base salary.

A123 had boosted those salaries 27% to 51% and awarded new stock options in February, just a few months after the company laid off 125 workers at its Michigan plants.