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A123 purchase by Chinese firm approved by US. Are energy secrets safe?

The acquisition of A123 Systems Inc. by China-based Wanxiang Group Corp. passed its last official hurdle with the authorization by the US government. The approval comes despite concerns that the A123 Systems deal would expose sensitive energy technology to Chinese authorities.

By Correspondent / January 29, 2013

An A123 Systems Inc. high power Nanophospate Lithium Ion Cell for Hybrid Electric Vehicles battery is displayed in Livonia, Mich. Some in Congress oppose the A123 Systems deal on national security grounds as A123 Systems holds existing contracts with the US Department of Defense.

Paul Sancya/AP/File

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A federal panel authorized late Monday the sale of A123 Systems Inc. to a Chinese auto-parts maker, according to the buyers. 

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Wanxiang Group Corp. said Tuesday it received approval from the US Treasury Department's Committee for Foreign Investment in the United States (CFIUS) to purchase the bankrupt batterymaker. The approval is the last official hurdle before the Chinese company can take control of A123. The approval comes despite concerns that the $257 million deal would give Chinese authorities access to energy technology developed with clean-energy grants from the US government.  

The Department of Energy awarded $249 million in grants to A123 Systems, based in Waltham, Mass., of which it received $130 million before declaring bankruptcy last October. The department has said it will not award the remaining funds to A123.

"American taxpayers should not be funding technology that will in turn be used in competition against American companies," wrote Rep. Bill Huizenga (R) of Michigan, in an e-mail to Reuters Tuesday. 

Some in Congress oppose the deal on national security grounds. A123 Systems holds existing contracts with the US Department of Defense. Those were sold independently to Navitas Systems, an Illinois energy company, but questions linger over how secure the military technologies are from exposure to Wanxiang, which has ties to the Chinese government.

“We don’t have any answers on whether U.S. national security concerns are protected," Sen. Chuck Grassley (R) of Iowa said in a statement Tuesday. "The only thing that’s clear is a foreign-owned company will benefit from the millions of dollars given to A123 through the President’s stimulus package. That’s troubling.”

Last December, Wanxiang outbid Johnson Controls of Milwaukee for the rights to A123 Systems, which makes electric car batteries for Fisker Automotive, BMW, General Motors, and other companies. The company has downplayed national security concerns.

"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's president wrote in an e-mail to Reuters.

Congress may explore legislation to block similar sales in the future, the Wall Street Journal reported Tuesday, but it is unlikely lawmakers will hold up the A123 sale. 

"From a practical standpoint, this is probably it," Josh Zive, an attorney at the Washington office of Bracewell & Giuliani and an expert on the CFIUS review process, told the Wall Street Journal.

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