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U.S. approves sale of A123 to Chinese firm
Detroit News - David Shepardson
January 29, 2013 at 10:05 pm


A Chinese firm late Tuesday acquired most of bankrupt A123 Systems' assets, as it announced the battery maker's chief executive has departed .

The Obama administration earlier Tuesday approved the sale to A123's U.S. subsidiary, Chicago-based Wanxiang Group Corp., a move that will keep about 1,000 jobs in Michigan.

Earlier, Wanxiang said it has received approval from the Committee on Foreign Investment in the U.S. to complete its acquisition of substantially all of the non-government business assets of A123 Systems Inc.

The sale officially closed late Tuesday, the company said.

"We are excited to add A123 Systems to our growing portfolio of companies as we continue to expand on our strategy of investing in the automotive and clean-tech industries in the U.S.," said Pin Ni, president of Wanxiang America. "A123 will continue to offer cutting-edge technology for vehicle electrification and grid-scale energy storage, strong manufacturing and systems engineering capabilities and a world-class R&D team. Wanxiang America will continue to foster the technologies A123 has worked so hard to develop, and we believe this combination positions A123 for long-term success."

The company said A123 CEO Dave Vieau left to "pursue other interests."

In December, Wanxiang won a bankruptcy court auction to acquire most of A123 for $256.6 million, including its grid and commercial business assets and its U.S. facilities in Michigan, Massachusetts and Missouri.

A123 had vowed to create 3,000 jobs by the end of 2012, but has created only 1,300. It won $249.1 million in grants from the Obama administration in 2009 to build battery plants in Romulus and Livonia, but has spent $132 million. It also received more than $125 million in tax credits and funding from the state of Michigan.

The Energy Department said it worked during A123's bankruptcy to keep jobs in Michigan.

"The Energy Department's Recovery Act grant to A123 was used for the construction of brick-and-mortar advanced battery manufacturing facilities at two Michigan locations," said Energy Department spokesman Bill Gibbons. "Consistent with the intent of that investment, the purchase of these assets includes the Energy Department's requirement that the plants and equipment partially paid for by the Recovery Act stay in Michigan and continue to operate, generating job opportunities for American workers and helping to establish a domestic manufacturing base for this growing global market."

Navitas Systems, a Woodridge, Ill.-based company, has agreed to buy A123's Ann Arbor-based government business, including all U.S. military contracts, for $2.25 million.

The committee, which is headed by the Treasury Department and includes other government agencies, makes no public announcement of decisions and releases no written findings.

"It doesn't surprise me that they approved it," said Josh Zive, a Washington lawyer who represents companies before the committee, noting that Wanxiang agreed not to buy the military and government contract assets.

President Barack Obama hailed A123 and even invited Vieau — the now departed CEO — to the Rose Garden in April 2010.

"This is what happens when we place our bets on American workers and American businesses. And we're going to continue working to help them manufacture more success stories like these across all sectors of our economy," Obama said.

In an interview Tuesday, Jason Forcier, who heads A123's automotive operations, said automakers are focusing more on "micro-hybrids" — a "big shift" away from EVs. A123 will be launching a micro-hybrid project for a major German automaker this spring, he said.

He said the deal "really represents the best possible outcome for employment in Michigan."

Wanxiang wants to continue to grow the business and will operate A123 as a wholly owned, stand-alone company. Forcier said Wanxiang has said publicly and privately that the company is committed to Michigan and A123's Michigan operations.

A123 filed for bankruptcy in October and initially sought approval to sell the bulk of itself to Johnson Controls Inc. in less than six weeks.

A123 has 625 employees at plants in Romulus and Livonia and an Ann Arbor office, along with 348 temporary workers in the state.

The Waltham, Mass., startup — which has lost $900 million since 2007 — received $50 million in debtor in possession financing from Wanxiang.

In November, Michigan's two senators and 11 House members raised concerns that the acquisition of A123 by a Chinese company may pose a threat to U.S. national security.

In a letter to Treasury Secretary Timothy Geithner — who chairs the Committee on Foreign Investment, which reviews the sale of U.S. companies — Sens. Carl Levin, D-Detroit; Debbie Stabenow, D-Lansing; and members of the House raised concerns.

Rep. Bill Huizenga, R-Zeeland, said Tuesday the decision hasn't "changed my opinion that the core technology developed by A123 and the intellectual property that goes along with it cannot be separated along A123's business lines. It is also apparent that this technology was developed using taxpayer dollars through President Obama's stimulus program and is now falling into the hands of a foreign company. American taxpayers should not be funding technology that will in turn be used in competition against American companies."

Huizenga said he is "currently looking into legislative solutions to prevent both taxpayer-funded and sensitive technologies from being sold to foreign companies in the future."

U.S. Sens. John Thune, R-S.D., and Chuck Grassley, R-Iowa, also criticized the decision.

"Technology produced by A123 and funded by U.S. taxpayers should not simply be shipped off to China so that the military applications for these materials can be reproduced abroad, Thune said.

Grassley agreed: "We don't have any answers on whether U.S. national security concerns are protected. 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."

The company is the latest in a string of advanced battery firms that have gone bankrupt despite millions of dollars in subsidies from state governments and the George W. Bush and Obama administrations.

In January, New York-based Ener1 filed for bankruptcy protection. A similar filing was made in March by Canada-based Azure Dynamics, which has offices in Oak Park and installs the battery electric vehicle powertrain in Ford's Transit Connect.

The Obama administration awarded $2.4 billion in stimulus grants in August 2009 for advanced batteries and electric vehicles, saying the awards would create thousands of jobs.

The president set a goal of 1 million electric vehicles on the road by 2015, but sales have totaled fewer than 40,000 since 2011. Many battery suppliers have created a small fraction of the promised jobs.