Chinese firm gets OK to buy failed U.S. battery maker
Despite winning 249 million in stimulus dollars, A123 experienced two battery recalls, slow demands and layoffs. / CBS News
A Chinese conglomerate has reportedly received the green light from the U.S. to buy Massachusetts green energy company A123, a failed battery maker that received an award of $249 million green energy stimulus tax dollars in August 2009.
In a statement, the president of the U.S. division of Wanxiang stated: "We're pleased the [U.S.] government has completed its review and provided us with the go-ahead to finalize this transaction. The future is bright for A123. It is a company with exceptional talent and potential."
Upon news of the approval, Sen. John Thune (R-SD) and Sen. Chuck Grassley (R-Iowa) issued a statement saying they worry about what will happen to any technology funded by US taxpayers.
"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," said Thune in a news release.
The federal committee that reportedly approved A123's sale to Wanxiang is the Committee on Foreign Investment in the United States (CFIUS). Its job is to screen proposed foreign purchases of U.S. businesses to national security. The committee is comprised of the heads of the Treasury Department and other federal agencies.
When asked to comment, a spokesman for the Treasury Department would not even confirm that CFIUS approval had been given. "I will decline to comment," a spokesman told CBS News. "By law, information filed with CFIUS may not be disclosed by CFIUS to the public. Accordingly, I cannot comment on specific transactions, including whether or not certain parties have filed notices for CFIUS review."
The Energy Department, which is part of the CFIUS process, appeared to confirm CFIUS approval in a statement. Spokesman Bill Gibbons told CBS News the stimulus money for A123 was "for the construction of brick and mortar advanced battery manufacturing facilities at two Michigan locations." Gibbons said purchase of the assets requires "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."
According to Thune and Grassley, A123 received more than $130 million of the promised taxpayer stimulus funds, including $1 million the day it declared bankruptcy.
"We don't have any answers on what will happen to the technology funded by the U.S. taxpayers," Grassley said. "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."
Shortly after A123 received the promise of stimulus funds in 2009, the company formed a joint venture with a Chinese automaker that had significant manufacturing and operations in China and Korea, according to Securities and Exchange Commission (SEC) filings. In December 2011, the company laid off 125 workers and lost $125 million the first quarter of 2012. Share prices continued to spiral down after A123 electric car customer Fisker flunked a Consumer Reports test because the car's A123 battery failed. A123 embarked upon a $55 million recall to replace defective batteries and filed for bankruptcy last October.
On Aug. 14, 2012, Thune and Grassley sent a letter to the Department of Energy after A123 announced a $450 million investment deal with Wanxiang to express concern about tax dollars going to a struggling company. There were clear indications that A123 was having financial problems even as the administration continued to pour millions of taxpayer dollars into the failing company.
On Oct. 9, 2012, Thune and Grassley sent a letter to A123 expressing their concerns regarding the company's potential agreement to grant Wanxiang majority control of the company. On Oct. 16, 2012, A123 filed for Chapter 11 bankruptcy and appeared to withdraw from the deal with Wanxiang. Instead, Wanxiang went to auction and bid on A123's assets to acquire the company as part of the bankruptcy proceedings. CFIUS, which is charged with reviewing foreign investments, approved the transaction, according to an announcement today from Wanxiang.
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