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Summary:

The auction of U.S. battery maker A123, expected to kick off today, will determine if the tech will stay in the U.S. with Jonhson Controls or be snapped up by Chinese conglomerate Wanxiang. The controversy exposes fears over China and the politicization of electric vehicles.

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The long awaited auction of the assets of lithium ion battery maker A123 Systems, which is expected to kick off on Thursday, is highlighting both U.S. fears of China as well as the now full-blown politicization of electric vehicles. The auction will determine whether or not American battery firm Johnson Controls will go ahead with its bid to buy A123’s auto business for $125 million, or whether Chinese auto parts giant Wanxiang will be able to win any of the technology with a higher bid.

If you haven’t been following this story, Wanxiang originally had a deal to buy up to 80 percent of A123 Systems for $450 million if A123 met certain conditions. Either those conditions weren’t met — or A123 grew worried that its deal with a Chinese conglomerate might face hurdles — because a few months later that deal fell through and A123 declared bankruptcy. The auction today will determine what happens to A123 post-bankruptcy.

Here’s why the prospect of A123 being sold to a Chinese firm has been raising eyebrows:

A123, once a promising battery maker that held one of the largest cleantech IPOs back in 2009, was awarded a grant from the Department of Energy for $249 million, and A123 drew down on $132 million of that grant. So the U.S. government put substantial money into developing this technology. In addition, A123 has had contracts with the U.S. military.

Both of these aspects have made a sale of A123 to Wanxiang distasteful to some politicians, like U.S. Sens. John Thune (R-S.D.) and Charles E. Grassley (R-Iowa). They’ve written letters on the subject and asked for a sale to Wanxiang be blocked. To add kindling to the fire, electric vehicles — and cleantech in general — have become a politicized issue, with high profile Republican politicians rejecting the support of electric vehicles, and Democratic ones embracing support for the technology.

Meanwhile, electric car startup Fisker Automotive, which has also been the subject of much politically driven criticism, has been a  major customer of A123’s batteries. So it is waiting on the result of the bankruptcy case before it figures out what to with the assembly of its cars. By the way, Fisker deserves a lot of criticism, but not for building its first car in Finland, which is what politicians have been upset about.

Fears of Chinese tech companies swooping in and buying up beleagured U.S. assets is at the heart of this issue. The discussions of the military contracts, and the misplaced grants from the DOE are side notes, which can be addressed independently. The reality is that China using the U.S. as a discount shopping mall is only going to continue to grow. Wanxiang has been — smartly or not — shopping for low valued energy, cleantech and electric car assets in the U.S. That’s how global capitalism works and in recent years has increasingly been working in the U.S. and China.

A123 should be allowed to find the best deal for its assets and shareholders regardless of the country. The potential acquirer that values the technology the highest, and is willing to pay the most, should win the bidding.

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  1. Felix Hoenikker Thursday, December 6, 2012

    Similarly with Boston Power as well as in the solar and LED industries. MiaSole is now Chinese company. CVD subsidies are still going so eventually one of the LED startups will become chinese too. Our politicians are focusing on the issues after the fact.

  2. Katie I suggest that you read my blog that exposes the hidden carbon tax to those who buy and pay for plug in vehicles. We all pay for plug in vehicles with the misguided tax credit that the IRS and Franchise Tax Board gives owners of plug in vehicles. In Europe a metric ton of carbon dioxide emissions trades for about $7 per US short ton. The implied carbon tax of buying a Chev Volt versus a Honda Civic CNG is over $2,675 per US short ton. The Chinese should be given the opportunity to waste their money on this betamax junk and Al Gore’s Fisker will never be produced in Delaware anyway even though the First State continues to pay the power bills to keep the empty factory in a ready state. The Moment Al Gore became a venture capitalist was the moment electric vehicles became politicized. The blog is at http://www.greenexplored.com/2012/11/volt-versus-cng-civic.html

    Sadly most people cannot perform the math to reveal the hidden taxes.

    1. I think you might want to review your assumptions. Electricity cost far less per mile than natural gas and is recouped by fuel savings which is why we have the added cost. Is there a market price for carbon in this country yet? But if you want to talk carbon you also need to take into account the additional emissions from compression. Furthermore you lose trunk space in natural gas vehicles, space is a premium in commercial vehicles. Lastly the cost of electricity is far more stable than the cost of natural gas, do you have an outlook on the fuel costs? My personal opinion is that prices are going up……it was ~$2/mmbtu Henry Hub in Feb now its close to $3.70 spot and fewer wet wells and steeper extraction curve drop offs than originally reported…..

    2. SADLY you seem to be ignoring the fact that it is not all about the upfront carbon cost of manufacturing electric vehicles, but the pay off that they do not require only gasoline to run over their life cycle.

      Post like this one above just seem like over thought-out fear mongering.

      It is not the end all be all solution, but it is definitely a step in the right direction.

  3. Politicization of electric cars?! No, not possible! It will never happen.

  4. ” The reality is that China using the U.S. as a discount shopping mall” – NO.

    The Bain Capital-based current reality may be that. But there is no reason the U.S. shouldn’t step in. After all, as was pointed out, A123 got significant money from the U.S. government and has DoD contracts.

    Now if the Chinese want to buy the Twinkies secret recipe…….

  5. Maybe China should avoid investing in the USA given that Americans are so paranoid. China should just invest in Africa, Asia, and Europe, where their investments are more welcomed.

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