Opposition mounts against DOE-funded battery company’s sale to Chinese firm

Josh Peterson Tech Editor
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The federal government’s review period concerning the sale of a bankrupt taxpayer-subsized battery company to a Chinese firm ends this month, and opposition to the deal from industry experts and competitors continues to mount.

A123 Systems, a battery manufacturer and supplier for the automobile company Fisker, went bankrupt in October 2012. It was then purchased in December 2012 by the Chinese company Wanxiang Group, through an auction run by Latham and Watkins, a law firm that contributed more than $200,000 to President Barack Obama’s re-election bid.  (RELATED: Latham conducts auction of troubled battery corporation)

A123 received a $250 million federal grant in 2009 from Obama’s stimulus program, making it a recent addition to the growing list of failed energy companies funded by Energy Department grants.

“I’m ringing alarm bells, and so are my colleagues,” Dean Popps — who served as acting United States assistant secretary of the Army for acquisition, logistics, and technology, and as co-chair of Strategic Materials Advisory Council (SMAC) — told The Daily Caller.

Popps expressed concern that the U.S. is losing its manufacturing, industrial and technological strength, and becoming more vulnerable to China.

“We are not taking a critical look at what China is doing in terms of assembling a portfolio of things that allow her to control our supply chain and  control our national security concerns,” Popps said.

“These batteries are used in satellites; these batteries are used in combat vehicles; these batteries are used in precision munitions – you know, wherever there’s sensitive stuff. It is the technology not only of the hour, but of the decade.”

A bankruptcy judge approved A123’s sale to the Chinese firm shortly after the corporation’s military contracts were sold to the newly-formed company Navitas, alleviating some national security concerns. Navitas still has to go through Wanxiang to make its product.

But the deal must be reviewed by the Committee on Foreign Investment in the United States. CFIUS is an inter-agency committee that determines whether a particular foreign investment into a U.S. company poses a national security threat.

A spokesperson for CFIUS declined The Daily Caller’s request for comment.

By law, information filed with CFIUS may not be disclosed by CFIUS to the public. The Energy Department also does not comment on information relating to specific CFIUS cases, including whether or not certain parties have filed notices for review.

The CFIUS review process, which takes 30 days, was extended to another 45 days in mid-December 2012. The review process ends this month, and SMAC — which is comprised of former U.S. government officials and industry experts — is trying to raise opposition to the deal before the review process ends.

U.S. energy company Johnson Controls — which Wanxiang outbid during the auction process — is also raising the alarm, hoping that CFIUS will block the deal and put A123 back on the table for Johnson Controls to purchase.

Johnson Controls unsuccessfully appealed the bankruptcy court’s decision in December 2012.

“It was clear in the bidding process that Wanxiang had a blank check, and we just got to a point where the value of the auction process exceeded to what we saw as the value of the estate,” Mary Ann Wright, vice president at Johnson Controls, told TheDC.

“The U.S. taxpayers have made significant investments in the battery manufacturing here in the United States, and with the exception of Johnson Controls, all of them have experienced significant difficulties, if not bankruptcy,” she said.

“We are the last standing of the U.S. battery manufacturers that remain healthy, committed to this industry and we’re committed to the point where we want to see A123 be able to be viable as a U.S. based company,” said Wright.

The Virginia-based political blog Politico reported this week that SMAC and Johnson Controls have close ties.

Wright was emphatic that the technology A123 possesses is first rate, but Derek Scissors, an Asia economist at the Heritage Foundation, told TheDC that he’s not convinced.

“No one thought it was advanced right up until the time the Chinese bought the company, and then the lobbyists got hired and suddenly it’s advanced,” he said.

On Capitol Hill, Republican lawmakers in December voiced their concern about the national security implications of the deal.

Tennessee Republican Rep. Marsha Blackburn announced on Tuesday her intention to introduce legislation later this month that would require Energy Department-funded companies “to report if they are being acquired by a non-allied foreign nation, and require the secretary of energy to report to Congress about whether the acquisition represents a threat to the United States.”

“Given the state of our economy, the American people deserve accountability and proper congressional oversight of taxpayer funds,” Blackburn said in a statement.

“We have repeatedly witnessed our tax dollars wasted on so-called stimulus projects that have ended in bankruptcy,” she said.

SMAC applauded Blackburn’s effort in a statement Tuesday.

Scissors said that while he thought taxpayer money has been wasted, he did not think that there was evidence that the deal was a national security problem, or that CFIUS would find the deal to be a national security issue.

“[This was] absolutely a case that taxpayer money has been wasted; it’s absolutely the case that CFIUS should investigate; there’s no evidence that this technology is actually advanced,” Scissors said.

“The burden of proof should be incumbent on the other side to say that CFIUS is not doing its job in this case, because we have somebody to evaluate this,” he said.

Pin Ni, who serves as president of Wanxiang America Corporation, Wanxiang’s U.S. arm, declined TheDC’s request for comment.

“We have other deals that we got approved very quickly, no issue at all,” Pi Ni told The Boston Globe on Tuesday. “It’s just a process you have to go through.”

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