A123 Systems sale still a raw deal to some

Republican senators angered by Chinese firm’s purchase of bankrupt Waltham battery-maker that received millions in taxpayer dollars under Obama

An employee examined a solar panel at Wanxiang NewEnergy in Rockford, Ill.
An employee examined a solar panel at Wanxiang NewEnergy in Rockford, Ill.

Congressional Republicans Monday criticized the pending acquisition of bankrupt Waltham battery-maker A123 Systems Inc. by a Chinese company, arguing that the deal shows how the Obama administration gambled millions in taxpayer dollars to bolster clean-energy technology that is now in Chinese hands.

Wanxiang America Corp., the North American arm of China’s largest auto parts maker, recently won the court-led auction for nearly all the assets of A123, which filed for bankruptcy protection in October, despite receiving tens of millions in federal and state money. Wanxiang’s $256.6 million purchase awaits approvals from a US bankruptcy judge and a federal committee on foreign investment chaired by Treasury Secretary Timothy Geithner.

The deal does not include A123’s government business and related military contracts, which are slated to be sold in a separate $2.25 million deal to Navitas Systems LLC, an energy storage firm in Woodbridge, Ill.


“The president borrowed money from China to pay for his $800 billion stimulus bill, and then gambled these funds away on now-bankrupt green energy ventures,” Senator John Thune, Republican of South Dakota, said in a statement Monday. “Now we learn that a Chinese company has bought one of these companies for pennies on the dollar. In the end, the taxpayers will be left having to repay interest to China for a business that a Chinese company now owns.”

Get Talking Points in your inbox:
An afternoon recap of the day’s most important business news, delivered weekdays.
Thank you for signing up! Sign up for more newsletters here

Senator Chuck Grassley, Republican from Iowa, echoed Thune’s message Monday.

Wanxiang beat out several other companies in the auction, including Johnson Controls Inc. of Milwaukee and Japan’s NEC Corp. Its success has renewed debate over government support for the alternative energy industry, US relations with China, and the role of foreign investment in the US economy.

Wanxiang has committed to keeping and expanding A123’s US operations — which employ about 1,000, including roughly 300 in Massachusetts — and has promised to abide by stipulations from the Department of Energy that the manufacturing facilities and jobs financed with federal money must remain in the United States. A123 used about $133 million of a $250 million Energy Department grant to build two automotive battery plants in Michigan.

Wanxiang will not receive any remaining grant money, energy officials said.


Energy officials added that the fierce competition for A123’s assets and the price paid by Wanxiang illustrates the potential of alternative energy and why it is worth taking risks on technology that could change the long-term energy outlook.

“The winning bid was roughly twice the amount that had been paid on the grant, which is a clear indication about the value of this growing industry,” said Bill Gibbons, an Energy Department spokesman.

But the Strategic Materials Advisory Council, a coalition of former US military leaders and industry specialists, said the issue is not whether A123’s assets are valuable, but rather whether the federal government should allow the transfer of technology that could affect the nation’s long-term economic competitiveness. Dean Popps, a former Army acquisition executive and cochair of the council, called for a vigorous review by the Committee on Foreign Investment in the United States.

The committee declined to comment, but A123 officials said it may not rule on the Wanxiang deal until late January. A123’s assets will be held in a trust that will manage the firm until the deal is finalized.

“We need to have a discussion, in my opinion, at the White House level and at the United States congressional level [as well as at] the Department of Defense and Homeland Security,” said Popps.


But this kind of increasing, and often needless, sensitivity about national security could hurt the US economy by discouraging foreign investment — a key ingredient to staying competitive, said Thilo Hanemann, research director at Rhodium Group, an economic research firm. Chinese investment, in particular, is playing a larger role here.

Although overall foreign investment in the United States has dropped by about 40 percent in the last year, Chinese investment has grown, said Hanemann. Rhodium projects Chinese companies could pour a record $6 billion to $7 billion into the United States this year, up from $4.5 billion in 2011.

Federal approval of Wanxiang’s acquisition of A123 would be a positive signal for Chinese and other foreign investors, Hanemann said.

Senator John Kerry said through a spokesman that his priority would be protecting Massachusetts jobs, while expressing faith in the government approval process.

“There are national security implications that are being thoroughly explored, and the appropriate authorities will also ensure that taxpayer and government investments are protected,” said the Kerry spokesman, Alec Gerlach.

Erin Ailworth can be reached at Follow her on Twitter @ailworth.