Fisker Automotive’s plans to make a luxury hybrid-electric car in Delaware hit another bump in the road on Tuesday with the announcement of the bankruptcy and sale of its battery supplier.
A123 systems of Waltham, Mass. filed for Chapter 11 bankruptcy protection in Wilmington, and agreed to sell its assets to Johnson Controls, an international technology company whose operations include a battery plant in Middletown, for $125 million.
Fisker, which previously halted plans to refit the old GM plant on Boxwood Road, Newport, said on Tuesday that the sale of A123 won’t disrupt its supply of batteries.
“Fisker welcomes the prospect of JCI, a recognized and strong supplier with which we already have a relationship, acquiring A123’s automotive operations in order to continue production of the battery pack that we currently use on the Karma to supplement our existing inventory, which is expected to cover our needs through at lease the first quarter of 2013,” the company said in a statement.
Johnson Controls will provide $72.5 million in “debtor in possession” financing to enable A123 to continue operating while the sale is being completed, A123 said in a statement.
The continued operations ensure that its supply of batteries to Fisker won’t be interrupted but even if it is, Fisker’s stocks are sufficient to meet its own production needs for some months, said company spokesman Roger Ornisher.
The company recalled its existing Karma model in January this year because of a battery defect that forced A123 to make improvements costing it about $55 million, Ornisher said.
Asked whether Fisker is still planning to begin production of its planned Atlantic model in Delaware, Ornisher said it has not yet committed to a location but that Delaware is still its first choice, and that the company will make a decision by the end of 2012.
“Delaware is still very much our first option,” Ornisher said. “There is no other option at the moment but if someone came and made us another offer we would have to consider it.”
Plans for refitting the old GM plant were halted in spring 2011 when the Department of Energy froze a $529 million loan because Fisker had missed sales and production targets for the Karma.
The company continues to renegotiate the loan with the DOE but the outcome of those talks won’t necessarily determine whether the Wilmington refit restarts, Ornisher said. That’s because the company is also seeking private funding, and has raised about $300 million in equity financing so far this year.
“We believe there is enough private equity out there to enable us to restart the refit,” he said. “There is a little bit more that we need. We have to keep our options open until funding is complete.”
Alan Levin, director of the Delaware Economic Development Office, predicted private financing will enable Fisker to complete the Boxwood Road refit and begin production there.
“My sense is that they are going to make this happen without the Feds,” Levin told WDDE. “They are going to find a way to buy out that agreement.”
He said it would be “foolish” for Fisker to abandon the Boxwood Road plant now that it is “broom clean” and ready for a complete refit. “If they are not coming here, I would be shocked,” he said.
The state has provided Fisker with $21.5 million in grants and loans with “clawback” provisions if an anticipated 2,495 full-time jobs are not created by the new operation.
The company originally planned to produce the first prototype at Wilmington by the end of 2013. Ornisher declined to say when production might start there if Fisker decides in December to go ahead with the Delaware plant.