Should an American company supported by the American taxpayer to the tune of $249 million be sold to the Chinese for almost that same amount ($256 million)? Republicans are raising questions that could derail the attempted sale to the highest bidder in federal bankruptcy court. “I am concerned,” says U.S. Rep. Bill Huizenga (R-Mich.), and Sens. John Thune (R-S.D.) and Chuck Grassley (R-Iowa) want a federal review by the committee that oversees foreign investment in the U.S.


The company, Boston-based A123 Systems, was once the shining light of the Obama administration’s $2 billion-plus stimulus funding for the battery industry. A123 is the supplier for the Chevrolet Spark EV and the Fisker Karma, and fields nanotech-enabled chemistry licensed by MIT. But the company (which collected only $133 million of the $249 million awarded) declared bankruptcy right before the election, and avoided becoming a political football then only because both Republicans and Democrats have supported the company.


The Obama administration might prefer this video not be freely available on YouTube, since it shows Democratic politicians waxing lyrical about the great days coming with the opening of an A123 battery factory:



A123 was considered likely to go to long-established American battery leader Johnson Controls, a sale that wouldn’t have been controversial. But China’s Wanxiang Group, a major parts supplier, was the high bidder for A123’s auto and commercial business (the military work was spun off separately). Uh oh. What do we do now? The first hurdle is approval from a federal bankruptcy judge.


This issue is more complicated than it seems, because the actual buyer was Wanxiang’s American arm, which employs 3,000 card-carrying citizens. Keep in mind that Nissan was a major recipient of federal funding to build the Leaf, both the car and its battery pack, in Tennessee instead of Japan. The job creation aspects of that are obvious, though there was some grumbling at the time. Fox News became exercised when Fisker — headed by a Dane, and making cars in Finland — got $528 million from a separate $25 billion fund. But all the federal work had to be performed in the U.S. (Fisker actually spent only $193 million before it ran into loan repayment issues.)


A123’s federal funding went to build not one but two brand-new battery plants in Michigan, located in Livonia and Romulus (Livonia at left). Presumably, that’s where A123 batteries will continue to be made, even with Wanxiang’s ownership. In fact, a review by the Committee on Foreign Investment in the United States is probably a good idea, because it could confirm that plan. The $2.4 billion fund was set up to ensure that the U.S. gets a slice of the battery business that will probably otherwise go to Asia.


A123’s Michigan factories would look like a good investment today if electric car demand was high, but unfortunately it’s pretty slow, and Fisker (Karma at right) has run into a thicket of difficulties (some related to batteries, some not). The Chevy Spark isn’t even in production yet, and volumes are likely to be low, at least at first. The sad fact is that battery capacity got pretty far ahead of battery demand — something Obama’s lenders could have foreseen.


There’s an aspect of partisan politics about all this “concern” from Republicans, but I wouldn’t dismiss their points so easily. Given China’s overall lack of patent protection, it’s possible that A123’s nano batteries could end up popping up all over. Plus, we have a huge trade deficit with China, and the American taxpayers shouldn’t be substituting green tech development there. We need it, desperately, here.


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Jim Motavalli ( @jmotavalli ) writes about cars, technology and the environmental world to anyone curious enough to ask.

Should A123's battery technology be sold to China?
Sure, a lot of the noise about the sale of a federally subsidized American company to a Chinese high bidder is political, but there are legitimate concerns, too