UPDATE 1-A123 Systems rescued by China's Wanxiang
* Four of nine board seats to go to Wanxiang
* A123 received Obama administration green energy grant
* Day-to-day operations of A123 unchanged for now
Aug 16 (Reuters) - Struggling U.S. battery maker A123 Systems, which received a $249 million green technology grant from the Obama administration, got a $465 million lifeline from Chinese auto-parts maker Wanxiang Group Corp.
Hangzhou-based Wanxiang will own 80 percent of Massachusetts-based A123, if all the warrants and notes are later converted to shares, A123 said in a statement on Thursday.
A123's rescue, which will give one of China's largest non-government companies a controlling interest, is sure to add fuel to the ongoing attacks by Republican presidential candidate Mitt Romney on President Barack Obama's green-energy initiatives.
The advanced car battery industry has been hurt in part by too much capacity and weak U.S. demand for electric cars.
As part of the 2009 American Recovery and Reinvestment Act's Electric Drive Vehicle Battery and Component Manufacturing Initiative, A123 was awarded a grant of $249.1 million.
A123 promised to create 38,000 U.S. jobs, including 5,900 at its own plants. A123 said on Thursday it has more than 1,200 workers. Since it got the grant money, A123 added nearly 1,000 workers.
David Vieau, A123's chief executive, said in a statement on Thursday that the company "believes that we will continue to expand on our strong manufacturing and systems engineering capabilities in Michigan and Massachusetts."
A123 spokesman Dan Borgasano said that Wanxiang has "expressed verbally their commitment to our U.S. operations, and their intention on building on our operations."
He said that may include adding jobs to A123's existing U.S. plants.
Borgasano said it expects Wanxiang to help A123 gain business around the world, and particularly in China. A123 already makes automotive batteries for three vehicles of the Roewe brand owned by SAIC Motor Corp.
Wanxiang, which had annual revenue of more than $13 billion in 2011, has more than 45,000 employees globally and supplies auto parts to many of China's largest automakers.
Borgasano said it was too early to say whether the current A123 management including Vieau will eventually be replaced. Once Wanxiang takes over a controlling interest in A123, four of the nine seats on A123's board will be filled by Wanxiang appointees, he said.
For now, he said, nothing will change in how the company is run.
Electric vehicle and hybrid sales for the first seven months of the year totaled 270,000, representing only 3 percent of total U.S. car sales, according to the green-car website Hybridcars.com.
A123 Systems said the planned investment includes an initial credit extension of $25 million that it expects to receive this week. The rest will come through a mix of convertible notes and bridge financing with warrants, as certain conditions are met.
The line of credit would help A123 keep making batteries for electric and hybrid cars as well as for power storage. Last month, the company said it was left with only five months of cash.
The agreement follows the non-binding memorandum of understanding that A123 signed last week.
A123 shares were trading down 1 cent at 47 cents on Thursday on the Nasdaq.
Thursday's announced investment of as much as $465 million is up from the $450 million announced last week when a non-binding agreement became public.
In 2011, A123 had revenue of $139 million, 60 percent of which was from its transportation business of supplying batteries for both passenger and commercial vehicles, 27 percent from its large-utility power grid business, and the remainder on commercial applications like backup data storage.
The company has said this year's revenue will be in a range between $145 million and $175 million.
Eventually, the company expects that power grid energy storage will make up half its sales. Current grid customers include three major utility companies: Edison International , AES Corp, and Sempra Energy.
Among A123's automotive customers are General Motors Co , BMW, SAIC Motor Corp, Tata Motors , and commercial vehicle maker Smith Electric Vehicles based in Kansas City, Missouri.
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