SHANGHAI (Reuters) - China's government has approved a plan by Wanxiang Group Corp, a major Chinese auto parts maker, to acquire bankrupt U.S. battery maker A123 Systems Inc AONEQ.PK, although a deal still hinges on the outcome of an auction next month and U.S. government approval.
A123, a maker of lithium ion batteries for electric cars, filed for Chapter 11 bankruptcy protection in October with a plan to sell its battery business to Milwaukee-based Johnson Controls (JCI.N) for $125 million.
The planned sale will depend on whether better bids are received at next month's auction. Wanxiang has said it intends to make a bid.
China's National Development and Reform Commission, whose approval is required for major overseas acquisitions by Chinese companies, said in a statement posted on its website on Friday that it had approved Wanxiang's plans for a bid.
Any deal for A123 must receive the blessing of the U.S. government, however, as the company has received a $249 million grant from the Energy Department.
Republican Senators John Thune and Chuck Grassley have raised concerns about Wanxiang's attempt to acquire A123's battery business, saying military and taxpayer-funded technology should not be allowed to fall into foreign hands.
The Energy Department has stressed that none of the government's grant would be allowed to fund facilities abroad.
Reporting by Samuel Shen and Jason Subler; Additional reporting by Fang Yan in BEIJING; Editing by Kazunori Takada and Edmund Klamann