Chinese auto parts maker Wanxiang has received approval to buy A123 Systems Inc, an American company that makes electric car batteries. The deal has drawn protests from legislators, who say A123 has potentially sensitive technology, developed with money from the U.S. government money, and it should not fall into foreign hands. So reports Reuters.
Wanxiang’s U.S. unit actually won A123’s automotive battery business last month in a bankruptcy auction, outbidding Milwaukee-based Johnson Controls Inc, but the transaction needed approval from the Committee on Foreign Investment in the United States (CFIUS), a government body led by the Treasury secretary. Wanxiang received that approval this week, Wanxiang officials said.
A123 officials said this month that they expect the deal to close by Friday, Reuters reports.
The company makes batteries for BMW hybrid 3- and 5-Series cars, Fisker Automotive, and the Chevrolet Spark, an electric car by General Motors Co. expected to be unveiled later this year. China’s SAIC Motor Corp and India’s Tata Motors also use A123’s batteries.
A123’s technology was funded in part through a $249 million federal grant that was part of a $90 billion program to promote clean energy. The money was used to build manufacturing plants in Michigan. But the company wound up filing for bankruptcy late last year after suffering technical problems and finding weak demand for hybrid vehicles.
Wanxiang America wants to grow upon the technologies A123 already has, Pin Ni, the president of Wanxiang America Corp., said in a prepared statement.
But it’s those existing technologies that have some lawmakers and members of the Strategic Materials Advisory Council, a group of retired military leaders concerned with protecting the U.S. industrial supply chain, up in arms. They fear the sale puts U.S. energy security secrets in foreign hands. They asked the Committee on Foreign Investment in the United States not to approve the deal but were overruled.
Technology financed by U.S. taxpayers should not simply be handed over to China. Military applications for these materials can then be reproduced abroad, Republican Senator John Thune (R-SD) said in a prepared statement.
Thune and Chuck Grassley, a Republican senator from Iowa, asked CFIUS for a full briefing on the A123 review.
Wanxiang officials tried to avoid any criticism by leaving A123’s defense contracts out of its bid. Those contracts, in fact, wound up being sold to Navitas Systems of Illinois for $2.25 million.
Chinese companies have been buying up companies overseas. Wanxiang, for instance, now generates about $1 billion in U.S. revenue by supplying parts to GM and Ford Motor. It has bought or invested in more than 20 U.S. companies, many of which were in bankruptcy, according to a congressional report. But with that investment has come criticism that companies tied to Beijing don’t necessarily play by free-market rules.
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