A123 Systems Might Seek Bankruptcy image

The producer of lithium ion batteries for EVs, A123 Systems, might seek bankruptcy as it runs out of cash.

A123 said that it won’t be able to make the payment on $2.76 million in outstanding 6% notes or the interest payment on $143.8 million of notes expiring in 2016, both due today.

“The company may not have sufficient cash to fund operations and may need to seek the protections provided under the U.S. Bankruptcy Code,” A123 said. “No assurance can be given that the company will be able to avoid restructuring, reorganization, or a bankruptcy filing.”

In 2009, A123 Systems was offered a $249.1 million federal grant to build a factory in the US, after it was financially affected by the cost of a recall of batteries for Fisker Automotive. In August the company announced it was trying to close a deal with Wanxiang Group Corp, the largest auto parts maker in China, for financing in exchange for a majority ownership stake. Wanxiang is willing to make an investment of $465 million in A123, in exchange for 80% stake.

A123’s future is not certain taking into consideration that the loans and grants offered to finance alternative-energy and transportation businesses has been constantly under political debate.