A123 Systems, the Detroit-based manufacturer of batteries for electric and hybrid cars, as well as other uses, announced that it has signed a definitive agreement in which the Chinese Wanxiang Group will invest up to US$465 million in exchange for an 80 percent stake in the company.

Wanxiang is China’s largest parts company and one of the country’s largest non-government-owned companies. The ailing A123 Systems battery maker, which last May expressed “substantial doubts” about its future, expects to receive US$25 million this week to cover its immediate needs.

“We believe that the significant commitment of capital from Wanxiang would help strengthen A123’s financial position, and by leveraging Wanxiang’s global capabilities, we expect to see increased demand for our products”, said A123 Systems CEO David Vieau.

A123 is the supplier of the batteries powering the Fisker Karma, which was recalled twice because of a battery-pack related fire risk: once in December 2011, right after its launch, and again this June, both times due to a potential coolant leak.

Nevertheless, the company is also supplying other carmakers such as BMW and has developed a proprietary lithium phosphate battery which is said to be superior to lithium-ion tech and will power the electric version of the Chevrolet Spark city car.

According to The Detroit News report, the company has received about US$500 million from state and federal governments to open two facilities in Michigan. The first one is situated in Livonia and opened in 2010, with the Romulus plant following last year.

A drop in hybrid and EV sales, however, as well as its recent problems led to A123 losing about US$600 million since 2008. Moreover, after the company announced last week that it had signed an unbinding Memorandum of Understanding (MoU) with Wanxiang, two Republican senators questioned whether the US$120 million A123 Systems still has to receive from the federal grant it had won should go to a company that will, from now on, be controlled by the Chinese.

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