US automotive rechargeable battery maker A123 Systems, which is the recipient of a $249-million green-technology grant from the US government yesterday filed for bankruptcy protection.

''This action is expected to allow the company to provide for an orderly sale of the automotive business assets and all other assets and business units,'' said the Waltham, Massachusetts-based company in a press release.

Johnson Controls plans to acquire A123's automotive business assets in a deal valued at $125 million and will provide financing of $72.5 million to support the battery maker's continued operations.

Milwaukee, Wisconsin-based Johnson Controls plans to acquire A123's automotive business assets, including its facilities in Livonia and Romulus, Michigan. It will also get A123's cathode powder plant in China and its equity interest in Shanghai Advanced Traction Battery Systems Co, a joint venture with Shanghai Automotive Industry Corp.

A123 Systems was a recent takeover target by China's Wanxiang Group

In its Chapter 11 filing with the US Bankruptcy Court in Wilmington, Delaware, A123 listed assets of $459.8 million and debt of $376 million.

Founded in 2001 by Dr Yet-Ming Chiang, Dr Bart Riley and Ric Fulop, A123 develops and manufactures advanced nanophosphate lithium iron phosphate batteries and energy storage systems that deliver high power and energy density, long life, for the transportation, electric grid, commercial and government markets.

The Nasdaq-listed company's nanophosphate technology is built on novel nanoscale materials, initially developed at the Massachusetts Institute of Technology.

Its clients include German luxury carmaker BMW, China's SAIC and US electric carmaker Fisker Automotive. It is also expected to supply batteries for General Motors' upcoming Chevrolet Spark EV.

The company laid off 125 employees in December 2011 after electric car maker Fisker reduced its purchase order of batteries following a recall from Fisker and five other clients over defective battery packs and modules that cost A123 around $55 million.

It reported a second-quarter loss of $82.9 million, on revenues of $17 million. A123 reported net loss of $55.4 million in 2011.

A123 has posted at least 14 straight quarterly losses and its shares have fallen 85 per cent this year to 24 cents at yesterday's close.

In August, China's Wanxiang Group offered to invest $450 million for an 80-per cent stake in A123, which stirred a hornet's nest as some Republican senators saw the investment as another Chinese attempt to buy key US technology. (See: Republicans see red in proposed Wanxiang-A123 Systems green deal)

''We determined not to move forward with the previously announced Wanxiang agreement as a result of unanticipated and significant challenges to its completion,'' A123 Chief Executive David Vieau said in a statement.

The cash strapped company had received a $249-million green-technology grant from the US government in 2009, half of which was used by A123 in building a manufacturing plant in Michigan, while the government extended the expiry date for the remaining untapped $120 million from end of 2012 to end-2014.