A123 Lines Up $450 Million Chinese Investor

A123 Systems Inc. says Wanxiang Group Corp. has agreed to invest as much as $450 million to gain an 80% stake in the struggling Waltham, Mass.-based battery maker. The companies hope to complete the deal by year-end.

The Chinese conglomerate will provide $25 million in immediate bridge financing and an additional $50 million after U.S. and Chinese government agencies approve the deal. At that point, Wanxiang would buy $200 million of the battery maker's senior secured debt and could invest another $175 million in the company.

A123 reported a net loss of $83 million in the second quarter as revenue plunged more than 50% to $17 million. The company, which warned in May it faced collapse without external financing, says the Wanxiang deal will "remove uncertainty" regarding its financial situation.

A123 has been hit with an estimated $55 million bill for replacing flawed batteries it supplied to BAE, BMW, Fisker Automotive, Navistar and Shanghai Automotive. Last year General Motors Co. hired A123 to supply next-generation batteries for its future electric vehicles, including the Chevrolet Spark EV due in 2013.

Wanxiang Group is a $13 billion company with operations in auto parts, manufacturing, clean energy, agriculture, natural resources and real estate. Its Wanxiang America unit employs more than 3,000 people in the U.S.

Wanxiang already operates a joint venture battery plant in China with Ener1 Inc., another American battery maker. Ener1 and A123 both have received U.S. Dept. of Energy funding to help launch their operations. A123 CEO David Vieau tells The Wall Street Journal that both American companies could be paired if Wanxiang takes control of A123.