By The Associated Press

Published: Sunday, December 9, 2012, 7:40 p.m.
Updated: Sunday, December 9, 2012

NEW YORK — Bankrupt battery maker A123 Systems Inc. on Sunday said it will sell most of its assets to the U.S. arm of Chinese auto parts conglomerate Wanxiang Group Corp. for $256.6 million.

Wanxiang America Corp. won an auction conducted under the supervision of the U.S. Bankruptcy Court for the District of Delaware.

A123's government business will be sold separately, for $2.25 million, to Navitas Systems of Woodridge, Ill.

A hearing seeking the necessary court approval of the sale is scheduled for Tuesday. The deal also must be okayed by the Committee for Foreign Investment in the United States, a federal inter-agency committee that reviews sales of U.S. companies to foreign owners.

A123, which makes lithium ion batteries for electric cars, grid storage and commercial and military applications, was awarded a $249 million grant from the Department of Energy in August 2009 to help it build U.S. factories. About $130 million of that grant was delivered before the companyfiled for bankruptcy.

Despite opening several plants and developing highly touted new technology, the company never posted a profit.

The company sought bankruptcy protection in October, and said it would sell its automotive unit to Milwaukee-based auto parts maker Johnson Controls Inc. for $125 million.

Wanxiang challenged Johnson Controls' role as the primary bidder, and stepped in to provide bankruptcy financing when the U.S. company declined to do so. In a statement on Sunday, Johnson Controls said it officially withdrew from the auction when it declined to match Wanxiang's bid.

The Justice Department has said A123 needs the government's consent to sell its assets, maintaining that any sale must protect the government's interests because of the 2009 grant.

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