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Chinese Firm Wins Bid for Auto Battery Maker

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Reposted from The New York Times

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Chinese Firm Wins Bid for Auto Battery Maker

Bill Vlasic | December 9, 2012 | NY Times

DETROIT — Wanxiang Group, a large Chinese auto parts maker, won a high-stakes auction on Sunday for assets of A123 Systems, the bankrupt American battery maker that was a centerpiece of the Obama administration’s loan program for electric vehicles.

A123, which filed for bankruptcy in October after chronic losses and a damaging battery recall, said Wanxiang agreed to pay $256 million for its automotive and commercial operations, including its three factories in the United States.

But the sale excludes A123’s business with the United States government and its military contracts. That portion of the company will be sold to a small energy company based in Illinois, Navitas Systems, for $2.2 million.

Spinning off the government-related business to an American buyer was meant to quell concerns about transferring sensitive military technology to the Chinese, said A123’s chief executive, David Vieau.

“We think we have structured this transaction to address potential national security concerns,” he said in a statement.

From the start, some Republicans in Congress have opposed Wanxiang’s efforts to buy A123, which received a $249 million federal grant to spur domestic manufacturing of batteries.

The deal, which requires approval of a United States bankruptcy judge, would expand Wanxiang’s share of the global market for lithium-ion batteries used in new electric cars like the Fisker Karma.

The A123 sale is the latest in a series of acquisitions of North American energy and manufacturing companies by state-owned and privately held Chinese firms.

Last week, the Canadian government cleared a $15 billion takeover of Nexen, the energy giant, by the state-owned China National Offshore Oil Corporation, or Cnooc.

Wanxiang outbid three other companies in the auction conducted for the bankruptcy court by the Chicago law firm Latham & Watkins. One of the three, Johnson Controls, based in Wisconsin, had tried to buy A123 as it was entering bankruptcy.

But Wanxiang has been in aggressive pursuit of A123 since earlier this year, when the Chinese company first offered emergency loans to keep the failing battery maker afloat.

The president of Wanxiang’s fast-growing American subsidiary, Pin Ni, said the deal would accelerate its growth in the American automotive and alternative-fuel industries. “We think adding A123 to our portfolio of businesses strongly aligns with our strategy of investing in automotive and clean tech industries in the U.S.,” he said.

The subsidiary, Wanxiang America, which is based near Chicago, owns several auto-parts firms and other companies and employs 3,000 American workers.

But the A123 deal is by far its most prominent and riskiest acquisition.

In addition to the approval of the bankruptcy judge, the deal requires the approval of the Committee on Foreign Investment in the United States, a broad-based group led by the Treasury Department that reviews foreign takeovers of American companies.

Mr. Ni expressed confidence that Wanxiang was the best owner for A123, when it would need considerable investment to meet production commitments for automakers like Fisker Automotive and General Motors. “We are committed to making the long-term investments necessary for A123 to be successful,” he said.

A123, which is based in Waltham, Mass., was once one of the most promising recipients of federal loans under the Obama administration’s $2 billion program to stimulate the electric-car industry in the United States.

But consumers have been slow to buy electric vehicles in large numbers, crippling any chance for A123 to make a profit. It also stumbled when its first big shipment of batteries to Fisker proved defective and needed to be recalled.

The company’s bankruptcy became a political issue in the recent presidential campaign, and its potential sale to Wanxiang has fueled concerns that China will benefit from technology developed with financing by American taxpayers.

One member of Congress, Marsha Blackburn, Republican of Tennessee, wrote in a blog, “The Hill,” on Friday that any sale of A123 to the Chinese had “significant implications” for American national interests.

At least two dozen other members of Congress have also opposed the deal, along with the Strategic Materials Advisory Council, a group of former American military and industry leaders.

“The writing is on the wall,” Ms. Blackburn wrote. “The administration must review and then reject any deal involving Wanxiang.”

The bankruptcy auction began last week, when Wanxiang, Johnson Controls, and the electronics makers NEC Corporation of Japan and Siemens AG of Germany submitted secret bids for A123’s assets.

The agreement announced by A123 on Sunday said that Wanxiang made the highest bid, but did not disclose the other offers.

According to the deal, Wanxiang would acquire A123’s automotive, electric-grid and commercial business assets, including all of its technology, products, customers, and factories in Michigan, Massachusetts and Missouri, which will continue to operate.

Wanxiang would also take control of A123’s fledgling operations in China, including its interest in a joint battery venture with Shanghai Automotive, the country’s biggest carmaker.

A123’s much smaller government division, which is concentrated in Michigan, will go to the little-known Navitas Systems.

There was no immediate comment from Navitas, which is described on its Web site as a newly formed company offering integrated design and technology for the energy-storage industry.

 

7 Responses to “Chinese Firm Wins Bid for Auto Battery Maker”

  1. Bob Goldschmidt says:

    Interesting that they bid just over the amount of the US loan so that they could minimize discontent and increase their chances of acquiring this important asset.

    A123′s flow battery technology may very well be a critical element for storage of renewable power.

    A123′s latest automotive battery technology has an expected lifetime that would allow construction of an electric car that could travel over a million miles without battery replacement.

    Now the Chinese will own it.

  2. Will Wilkin says:

    Apparently NOTHING matters except “highest bid.” The almighty market will, automatically, protect and strengthen American industrial capacity, right?

  3. Tom T. says:

    Well, when you have Chinese workers that make next to nothing and allow the Chinese communist political elite to capture the buying power of their earnings, what else do you think will happen?

    The Chinese oligarchs have read George Orwell’s book, “1984″ and will continue to pursue the goals common to all oligarchs as long as our politicians allow it to happen. Free market, yes indeed. It is free for the oligarchs, it seems, and is even subsidized by our government. Incredible how incompetent ideology is in cahoots with the oligarchs over the common man both in China and in the United States. We better brush up on our Chinese and the communist manifesto (the oligarchs guide to using ideology to buy the world’s economy).

    Tom T.

    • Bob Hall says:

      From a conversation* between Mo Xiusong, Vice Chairman of the Chinese People’s Political Consultative Conference, and Dr. Clark Bowers, member of a U.S. delegation to China:

      Clark Bowers: Is the long-term goal of the Communist Party of China still world Communism?

      Mo Xiusong: Yes, of course, that is the reason we exist. However, the road to Communism may take well over a hundred years and the transition doesn’t have to be violent.

      Clark Bowers: Is it possible to reach your goal of world Communism while any of the bourgeois or their economic environment still exist?

      Mo Xiusong: No, that would be against the laws of science.

      Clark Bowers: As part of your reform, do you even desire to ever allow for anti-Socialist political parties?

      Mo Xiusong: No, that would be unconstitutional.

      Clark Bowers: Do you have any desire to change this part of the constitution?

      Mo Xiusong: No, the people wouldn’t support it.

      Clark Bowers: Who speaks for the people of China?

      Mo Xiusong: The Communist Party of China acts on behalf of the workers of China. We are their mind.

      Mo Xiusong continues: The historical miscalculations of Gorbachev led to an unbridled chaos that tore the social fabric of the USSR apart. We opposed a similar destabilization in Tiananmen Square in 1989, and history has vindicated our leadership by the economic and political stability that has followed.

      “Dollar to the Giant: note [10/21/10]: Surprisingly few Americans remember that the Communist Party of China created the People’s Liberation Army long before there was a People’s Republic of China. The CCP and PLA then — “out of the barrel of a gun,” in Mao’s words — established the People’s Republic of China. Essentially, they are all one and the same. When we buy Chinese-made goods, our money supports the People’s Liberation Army. When multinational corporations do business in China, they partner with the Chinese Communist Party — worth thinking about when you hear the words “Wall Street.”

      *Quoted in Beating the Unbeatable Foe, by Frederick Schwarz, M.D., pages 408 – 410

      • Bruce Bishop says:

        Mr. Hall,

        Thank you for posting this reminder of what Communism is all about. Some of the folks who post here may be too young to remember the Tiananman Square massacre, where hundreds, maybe thousands, were shot to death or crushed by tanks to “preserve order.”

        Communism pretends to be about “equality” but it is about tyranny. The only people who are well-off under Communism are the party chiefs and the apparatchiks who carry out their orders. Communism is based on GREED and a lust for power. The “useful idiots” who support Communism are being manipulated by their own envy and a desire to feel important.

  4. Will Wilkin says:

    Hi Tom, I think China’s ideology and system of government is none of our business, in the same way we would not appreciate their advice on our many problems here at home. I agree that the material reality behind China’s rise is the lower standard of living, ie, relatively low wages compared to the richer countries. But not all poor countries rise up to become technologically developed and rich, which China is doing. So whatever they are doing, in terms of ideology and social system, it is working for them now at this time in their history, at this stage of development of their economy and society. Whatever is wrong with it is for the Chinese people to fix on their own schedule.

    I would apply the same reasoning to the USA. The US government should be concerned with developing the US economy to increase the standard of living of the American people, both immediately and with a strategic vision to guide long-term policy to ensure strong manufacturing and all the other industries and inputs that could again put manufacturing at the heart of our own economy. That is the only way to grow our economy out of the mass unemployment, deepening and spreading poverty, and the deterioration of our infrastructure and all the human skills and knowledge atrophying now through inactivity (offshored industries). That renewed growth of the American economy based on a new manufacturing revival here would also be the only way to fix the public sector debt problems that are caused not by “entitlements” but by the combination of offshoring the manufacturing engines of wealth creation while squandering accumulated wealth and credit on global militarism, to the cost of $1 Trillion annually.

    http://www.theamericanconservative.com/articles/1-trillion-for-defense/

    WW2 and the Cold War changed America from an industrial giant governed to promote industry….into an international cop and empire. Our rulers thought we were so rich that we never again needed to worry about economy, and thus they set on building Cold War global alliances, often by opening US markets to poorer countries, driving our industries overseas or into bankruptcy by being undercut through imports. This trend has accelerated since about 1970, bringing us to the point now where we are dangerously under-built at home and dangerously overextended abroad. It has been called imperial overstretch, and considering it was built on decades of supporting ruthless dictators I do not think the US has the moral standing to lecture other countries about their own democracy or human rights.

    For a timely example of this US arrogance and hypocrisy, look at Paul Craig Roberts’ latest article, published this morning:

    http://www.paulcraigroberts.org/2012/12/11/obdurate-washington/

    EXCERPT:

    Here is the Russian government accused, without any evidence, of ONE torture and death, while Washington has such a large number of torture deaths from Abu Ghraib to Gitmo to the secret CIA torture centers to endless drone attacks on kids‘ soccer games, weddings, funerals, medical clinics, schools, farm houses and aid workers. The evidence is completely clear that Washington has tortured a number of individuals to death and into false confessions and blown to pieces thousands of innocents known as “collateral damage.” No one but Washington and its servants denies this. But one alleged Russian offense against human rights brings forth an act of the US Congress, all in a huff about the violation of a Russian lawyer’s human rights…

    …The holier-than-thou presence that Washington presents to the world is so phony and shopworn that Washington is becoming not only despised but a laughing stock. Peoples cease to fear the “superpower” when they laugh at its folly, hypocrisy and utter stupidity…

    …Washington is like the drunk in a bar who picks a fight with a bruiser. Washington is full of itself, but Russia and China are not going to put up with a financially busted and militarily overstretched popinjay.

    END EXCERPT

    Although he doesn’t mention it in this article, Dr. Roberts has been consistently clear that offshoring American manufacturing and other high value-added industries is the central problem driving America’s decline. The militarism and hypocrisy he criticizes are the fully-developed consequences of that long process since WW@, during which our political leaders turned away from American economic development and instead focused on playing World Empire. Well the world has changed radically during the process, and the ground on which we stand has eroded dangerously. But since all the income and wealth left have been more and more concentrated at the top of American society, the leadership will be the last ones to understand how our country was ruined.

  5. Tom T. says:

    Will, when I use the terms “communist China” I mean less about the cold war issues and baggage and more about pointing out the economic differences and hypocrisy of their system (our system has its own hypocrisy). I, too, think that the cultural mentality for the Chinese may make communism fit their society and I am fine with that. What is wrong is that it isn’t really communism in its pure form, but more and more similar to our economy where there are a very few at the top concentrating the wealth generated in the economy to themselves at the expense of the society as a whole, unless measured by increased government power.

    I think you make a lot of really good points. Our military strength (and China’s) rests on the underlying economy. We are selling that to the Chinese with our trade policy. We are also selling capitalism to the oligarchs here in this country, both of which undermine our economy.

    Members of a supposed capitalist society should not have to compete with workers in China who have many fewer protections than workers here and a government that does not allow redress to fix these problems (we are losing that redress process too).

    The similarities between the oligarchs in China capturing the wealth and our own oligarchs influencing government to do the same at the expense of their citizens is scary.

    My view is less of a cold war/communist is bad view to one that realizes the problems in policy, especially trade, and the destructive consequences it has on our own economy (and the common people in China).

    Tom T.

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