(Reuters) - A123 Systems Inc (>> A123 Systems, Inc.), a lithium-ion battery maker backed by a $249 million U.S. government grant, received notice from the Nasdaq this week that its stock price is too low for exchange standards and will be delisted if it does not recover to $1 in the next six months.

A123 said in a securities filing on Wednesday that it has until February 19 to increase its share price back to $1, which it breached more than a month ago.

The stock closed at a lifetime low of 37 cents on the Nasdaq on Wednesday and has dropped more than 90 percent from its 12-month high in September 2011, hurt by the company's worsening cash position due to slower-than-expected demand and a pricey battery recall this year.

To meet the Nasdaq's standards, A123's shares must close at $1 or more for 10 straight business days.

This year, A123 was hit by costs tied to recalling defective batteries installed in Fisker Automotive's Karma plug-in hybrid. Battery demand has not been as robust as A123 predicted in 2009, when it won a technology grant from the Obama administration.

But the battery maker won a lifeline this month from Chinese auto parts firm Wanxiang Group Corp, which is investing $465 million to buy 80 percent of A123.

A123 also makes batteries for some models manufactured by BMW (>> Bayerische Motoren Werke AG) and General Motors Co (>> General Motors Company).

(Reporting by Mridhula Raghavan in Bangalore and Deepa Seetharaman in Detroit; Editing by Supriya Kurane and Edmund Klamann)