A123 Systems Acquisition Triggers Security Concerns

Industry representatives and politicians warn that A123 purchase facilitates sensitive technology transfer

By Valentin Schmid
Epoch Times Staff
Created: January 31, 2013 Last Updated: February 3, 2013
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When a Chinese company buys a business in the United States, it is rarely a simple matter of price and business fit. National security concerns regularly intrude, as in the recent case of the Wanxiang Group, a Chinese industrial conglomerate with close ties to the Chinese Communist Party, buying A123 Systems, a U.S. battery maker that supplied key technology, some of it funded by taxpayers, to the military.

“The approved sale marks yet another step in the coordinated strategy by foreign countries to acquire leading US companies who are researching, developing and producing critical technologies,” Dean Popps, a former Army acquisition executive and co-chair of the Strategic Materials Advisory Council, a lobbying group, said Jan. 29.

We cannot cede to other nations the technology that will power new jobs and new industries—we must claim its promise.
-President Barack Obama

A123 Systems Inc. makes advanced battery systems for use in automobiles, the electrical grid, as well as commercial and military applications. It had filed for bankruptcy in October 2012, having previously received a federal grant of $249.1 million.

China’s largest auto-parts maker Wanxiang, which had tried and failed to acquire the company before it filed for bankruptcy, won a court bidding process last December. Its offer of $256.6 million trumped competitive bids from U.S. Johnson Controls and Germany’s Siemens AG.

Republican Rep. Marsha Blackburn was also concerned about the sensitive technological assets that A123 developed and that might fall into the hands of the Chinese government.

“The Obama Administration, through a body known as the Committee on Foreign Investment in the United States (CFIUS), can—and should—block the sale to Wanxiang on the grounds that it would harm U.S. interests,” she wrote on The Hill’s Congress blog in December.

CFIUS approved the transaction Jan. 29, partly because the sale was modified to pre-empt concern by the regulatory body. A123 System’s military contracting business supplies batteries for soldiers, vehicles, and unmanned aircraft. To pre-empt any concern, the military contracting business was sold to Navitas System, a small battery maker from Illinois, for $2.2 million.

Wanxiang can now complete the acquisition of the $459.8 million in assets the Waltham, Mass.-based company owns. Splitting off the contracting business, however, does not allay the fears of critics of the transaction.

Technology for Civilian and Military Use Similar

“We live in a world where military procurement, especially of electronic systems, is dominated by dual-use products. Not that everything is off the shelf, there are certainly specialized versions of products and components produced for defense specific purposes, but they’re not so very different,” Alan Tonelson, a research fellow at the think tank U.S. Business and Industry Council told The Epoch Times.


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