In September, 49 young children in the area were diagnosed with abnormally high levels of lead in their blood. Three children remain hospitalized for lead poisoning, according to the government.

After nearly six months' investigation, the government blamed lead pollution from three companies in the area: the Johnson Controls plant, a factory that produces oil reservoir caps for autos, and a waste recycling company.

Of the three, "Johnson Controls Inc. is the main lead pollution source in the area," said the Shanghai city government.

Johnson Controls' plant, which produces lead-acid starter batteries, expanded production without proper authorization, leading to an unacceptably high level of lead emissions, according to the government.

The municipality said it has asked Johnson to halt production.

The company disputes the government's allegations. In December, Johnson Controls cited an independent investigation which concluded that the plant could not be the cause of the lead pollution.

That study identified lead emissions from the waste recycling company which were three times as high as China's current standard.

Johnson Controls' plant in Shanghai plant supplies batteries to Shanghai Automotive Industry Corp.'s joint ventures with General Motors and Volkswagen AG. Before it shut down, the factory was producing 3 million batteries a year.

Alex Molinari, president of Johnson Controls Power Solutions, told Automotive News China Friday that the Shanghai battery plant meets the company's international standards for lead emissions.

But it isn't clear when the facility will reopen, and Molinari says it may close permanently. "We are hopeful that we can restart production, but we do have an alternative strategy," he said.

If necessary, the company will boost production elsewhere, he said.

Johnson Controls has embarked on an aggressive $500 million (3.2 billion yuan) expansion program to build four new battery plants in China.

The first, in the city of Changxing west of Shanghai, launched production last year. The second, located in Chongqing, will open in October. Johnson Controls has not yet selected sites for the third and fourth plants.

The four facilities eventually will produce a total of 30 million batteries per year.

As they launch production, Johnson Controls has less need to keep its Shanghai plant open, Molinari said. "The longer it stays closed, the less important it is to us long-term," Molinari said.