Senators: Firm got U.S. check on day it filed Chapter 11

• A123 Systems' check was part of a $249 million Energy Department grant
• The battery maker filed for bankruptcy protection last month
• Two companies have made bids to buy A123's assets

DETROIT -- Battery maker A123 Systems received a $946,830 check from the U.S. Department of Energy the same day it filed for Chapter 11 bankruptcy protection last month, according to a letter released by two Republican senators who say the Obama administration is funding failed clean-energy companies.

Republican Sens. Charles Grassley of Iowa and John Thune of South Dakota on Friday released a Wednesday letter from Eric Pyenson, A123 vice president and general counsel.

The Waltham, Mass.-based company with Michigan plants in Livonia and Romulus also said it may seek additional payments from a $249.1 million Energy Department grant awarded in 2009. A123's Oct. 16 check was the latest payment as part of the original grant, which is distributed periodically as the company meets certain benchmarks.

A123 has received $133.3 million of the grant so far.

A123 filed for bankruptcy protection last month after saying it would have to spend $55 million to replace defective battery packs that forced start-up electric-car maker Fisker Automotive, also a recipient of U.S. assistance, to recall its $100,000-plus Karma electric car.

The fate of A123's assets will be determined in a bankruptcy auction. Chinese auto supplier Wanxiang and Milwaukee-based supplier Johnson Controls are bidding for A123's assets. JCI has offered $125 million for the auto-related assets, including the plants in Michigan.

Wanxiang agreed with A123 this past summer to buy as much as 80 percent of the battery maker, but that deal fell apart after Republicans questioned the accord. If Wanxiang wins the bankruptcy auction, it will still have to secure approval from a federal committee that signs off on the sale of potentially sensitive assets to certain foreign companies.

"The Department of Energy is writing checks to a company literally as it is declaring bankruptcy," Grassley and Thune said in a statement Friday. "The Department of Energy needs to answer for why it appears to put federal grants on autopilot to the detriment of U.S. taxpayers. This can't stand."

The Energy Department has said it will consider distributing the rest of the grant funding to A123 or to its eventual buyer despite the company's bankruptcy.

"The Energy Department takes its responsibility to be good stewards of the taxpayers' money very seriously," spokesman Bill Gibbons said.

A123 did not respond to requests seeking comment.

Meanwhile, A123 said in a government filing that a trustee has reduced by 12.5 percent retention bonuses it offered to 10 key employees as it proceeds through bankruptcy. Those original bonuses totaled between $2.4 million and $4.2 million collectively, according to the filing with the Securities and Exchange Commission.

A123, formed a decade ago with intellectual property from the Massachusetts Institute of Technology, was once celebrated as an example of Michigan's clean-tech manufacturing future.

The company promised to add thousands of jobs in Michigan after winning the federal grant and more than $125 million in tax credits and grants from the Michigan Economic Development Corp. in 2008 and 2009.