Battery maker A123 Systems announced today it has reached a deal which could lead to up to a $450 million investment from Chinese auto parts maker Wanxiang. 

Waltham, Mass.-based A123 Systems said it signed a memorandum of understanding where Wanxiang will provide debt financing and a credit extension. Once certain conditions are met, Wanxiang would later invest $200 million worth of A123 shares. The full investment would give the company 80 percent ownership of A123 Systems, according to reports.

The deal was forged to remove the uncertainty over A123 Systems’ future. The company has been losing money, hurt by lower volumes of electric vehicles sales than anticipated and technical glitches which required a recall. (See, What Happened to A123?) 

“A substantial investment from Wanxiang would not only provide financial stability to A123 as we continue to grow, but it would also align us with a large, successful global brand in the automotive and cleantech industries,” said A123 Systems CEO David Vieau in a statement.

In May, the company hired an outside firm to find a strategic investor to solidify its financial foundation. The MOU was announced in conjunction with A123’s second quarter results. The company’s revenue plunged and it posted another quarterly loss.

In a presentation to investors this morning, Vieau said partnering with Wanxiang will improve A123 Systems’ position in both the electric vehicle and grid storage markets. A123 can also benefit from Wanxiang’s supply chain manufacturing expertise. With revenue over $13 billion, it is the largest auto components maker in China and one of the largest non-government owned businesses in China, according to A123.

Without a significant capital investment and better access to a vibrant market for EVs and grid storage, A123 Systems’ prospects looked bleak. In July, the company told investors it had only four months of cash left on hand, raising the prospect of the one-time high flyer going bankrupt.

It continues to make advances in its technology, which could help its competitive position. In June, it detailed a new battery chemistry that provides more power, longer life, and can operate better in higher temperatures. A123 Systems is hoping it will be sold for use in micro hybrids, EVs, or back-up power for telecom towers. (See, Battery Maker A123 Announces New Tech to Jumpstart Its Business.) 

In a statement, Wanxiang Group CEO Weiding Lu said the investment in A123 will aid the company’s international expansion in the United States. 

Shares of A123 Systems, which have been below $1 since last month, were up over eight percent this morning.