Struggling US electric-car battery-maker A123 has found a salvation in a deal that will give 80% of its shares to China’s Wanxiang Group, reported Reuters Thursday.
Wanxiang is an auto-parts maker that has been operating in the US for nearly 20 years. A stake in A123 would dovetail with its ambition to become a major player in the electric-car market.
“Developing electric cars is part of our industrial upgrading efforts,” Wanxiang Group founder Lu Guanqiu had said before the A123 deal was announced. “Doing this requires a lot of spending and equipment, but electric cars are the future.”
Wanxiang will invest up to $450 million in A123 which makes high-tech batteries for hybrid and electric cars.
On Wednesday A123 reported an $82.9 million loss for Q2 compared with a loss of $55.4 million a year earlier. It also warned that it had enough cash to fund operations for four to five months. It expects the deal to be completed before the year end but expects an early cash injection from Wanxiang to keep operations on track.
Wanxiang Group is based in Hangzhou, in Zhejiang province in coastal China. Its US subsidiary owned 28 manufacturing plants in 14 US states employing over 5,680 as of February.