The long awaited auction of the assets of lithium ion battery maker A123 Systems (s AONE), 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.