* Electric car battery maker A123 got U.S. govt money
* U.S. foreign investment committee approves purchase
* U.S. lawmakers warned about loss of sensitive technology
* Deal excluded defense contracts
* Wanxiang has history of investing in United States
By Tom Hals and Ben Klayman
Jan 29 China's largest auto parts maker won U.S.
government approval to buy A123 Systems Inc, a maker
of electric car batteries, despite warnings by some lawmakers
that the deal would transfer sensitive technology developed with
U.S. government money.
The sale of the lithium-ion battery maker to a U.S. unit of
Wanxiang Group was approved by a U.S. government committee on
foreign investment, according to a statement from the Chinese
company. The companies later said the deal had been completed.
Last month, Wanxiang's U.S. unit agreed to pay $257 million
for A123's automotive battery business and related assets in a
bankruptcy auction, beating U.S. rival Johnson Controls Inc
But the transaction still needed approval by the Committee
on Foreign Investment in the United States, a government body
led by the Treasury secretary. The committee approved the deal
on Monday night, according to Wanxiang.
"Wanxiang America looks forward to closing the transaction
and to continuing to foster the technologies A123 has worked so
hard to develop," said Pin Ni, the president of Wanxiang America
Corp, in a statement.
Jason Forcier, president of the newly formed A123 Systems
LLC's auto business, said Wanxiang was focused on pushing A123
to profitability within a few years. "Wanxiang obviously brings
financial stability to the company that we haven't had in at
least the last six to 12 months," he said in a telephone
Some members of Congress and the Strategic Materials
Advisory Council - a group including retired military leaders
that is focused on protecting the U.S. industrial supply chain -
said the sale to Wanxiang could jeopardize U.S. energy security
and they asked the U.S. committee to block it.
A123 had received a $249 million grant from the U.S.
government as part of a stimulus program to promote clean
energy, although about half of that money was never released.
The company filed for bankruptcy in October due to
weaker-than-expected demand for hybrid vehicles and technical
The company makes batteries for Fisker Automotive, BMW
hybrid 3- and 5-Series cars, and General Motors Co's
all-electric Chevrolet Spark, which is scheduled for
release later this year. China's SAIC Motor Corp and
India's Tata Motors also are customers.
The money raised by the sale will be used to repay the
battery maker's debts of about $376 million.
Wanxiang tried to blunt criticism of the deal by excluding
A123's defense contracts from its bid at the auction. Those were
sold separately to Illinois-based Navitas Systems for $2.25
"There is no question that CFIUS process is there to fully
protect national security issues and we are glad that we could
have addressed all the concerns CFIUS has," Wanxiang America's
president said in an email to Reuters.
Among the lawmakers who remained opposed to the sale were
two senators who questioned the government's funding of the
battery company even before its bankruptcy.
"Technology produced by A123 and funded by U.S. taxpayers
should not simply be shipped off to China so that the military
applications for these materials can be reproduced abroad," said
a statement from Senator John Thune, a Republican from South
Thune and Senator Chuck Grassley, a Republican from Iowa,
called on CFIUS to give a full briefing on the A123 review.
A123 received its U.S. government funds, which it used to
build manufacturing plants in Michigan, as part of a $90 billion
program to promote clean energy.
Chinese companies have been pouring cash into overseas
investments, and with that money has come concerns around the
globe that companies with ties to Beijing may not play by
The CFIUS recently rejected a bid to build wind farms in
Oregon by Ralls Corp, owned by two executives of China's Sany
Group. The committee has also blocked multiple deals
by Huawei Technologies Co, a Chinese telecom equipment
Wanxiang may have soothed the concerns of CFIUS members with
its history of investing in the United States.
The company generates about $1 billion in U.S. revenue by
supplying parts to GM and Ford Motor Co. It has bought or
invested in more than 20 U.S. companies, many of which were in
bankruptcy, according to a congressional report.
Forcier said with Wanxiang's backing, A123 will invest in
areas where it sees growth, including batteries for hybrid and
microhybrid vehicles. While the auto business will make up half
of the company's sales this year, the electric grid unit is
expected to become its largest business within the next several
He also said A123 hopes to leverage its ties to Wanxiang
into more business in China, where it operates through a joint
venture with SAIC. Forcier said A123 will operate as a
stand-alone entity and no major job cuts are planned.