Tag: A123 Systems

Military Suffers With Sale Of Company To China

Military Suffers With Sale Of Company To China – Human Events

The U.S. will lose access to critical materials used in military technology and the country’s electrical grid if the Obama administration approves the controversial sale of a bankrupt American company to a Chinese manufacturer, warns a former Defense Department official.

The Wanxiang Corporation has moved to snatch up the failed A123 Systems enterprise that was financed in part with a $249 million taxpayer-funded grant to produce advanced lithium ion batteries.

A decision is expected this month from the Treasury Department’s Committee on Foreign Investment in the United States (CFIUS) as to whether it will approve the sale or reject it on the grounds a sale poses a threat to national security.

Dean Popps, who served as deputy assistant secretary of the Army and acting assistant secretary of the Army for acquisition, logistics and technology under the Obama and George W. Bush administration, says losing the technology will hamper military readiness.

“You don’t want to be building a military spy satellite and be reliant on a lithium ion battery that’s made in China because you don’t make it anymore,” said Popps, who serves as co-chair of the Strategic Materials Advisory Council, which opposes the sale to Wanxiang.

The breakthrough technology produced by A123 Systems is far more advanced than other alternatives on the military market, and the U.S. should not be dependent on a foreign power, China in particular, to resupply the essential technology back to the U.S., Popps said.

CFIUS even warned in its annual report to Congress published in December that there is a coordinated strategy underway by foreign powers to acquire U.S. companies producing critical technologies.

“The U.S. intelligence community judges with moderate confidence that there is likely a coordinated strategy among one or more foreign governments or companies to acquire U.S. companies involved in research, development, or production of critical technologies for which the United States is a leading producer,” said the unclassified version of the report.

Preferred tool in satellites

The cutting edge technology is the preferred tool used in satellite systems; military vehicles, the power grid and telecommunication systems and can withstand high heat and extremely cold temperatures.

A bankruptcy court approved the sale agreement with Wanxiang last month for $256 million, along with a separate purchase proposal from Navitas Systems for A123’s military contracts at a $2.25 million price tag.

However, the court seems to have overlooked the security implications of specific important cross-licensing agreements allowing Wanxiang to share intellectual property, facilities and equipment with Navitas, Popps said.

“The predisposition is to give the Chinese all of the company’s 91 patents and let them run through the tall cotton with all this stuff,” Popps said. “Once you let the Chinese in commercially into this thing, they are back-doored into the whole thing. You don’t want to be building a military spy satellite and be reliant on a lithium ion battery that’s made in China because you don’t make it anymore.”

Rep. Marsha Blackburn (R-Tenn.) has been a vocal critic of the sale’s impact on national security as well as the string of financial failures of alternative energy companies funded with tax dollars by the Obama administration.

Blackburn introduced legislation last week that would require the federal government to report to Congress proposed acquisitions by non-allied foreign nations of companies that taxpayers have helped fund. The bill also requires that the government recover the money from those loans or grants when the company is sold.

Battery maker A123 is one of 36 green companies that were awarded federal dollars from the Energy Department but are now facing bankruptcy or are laying off workers, including Solyndra, Evergreen Solar, Beacon Power, SunPower and SpectraWatt.

“We have repeatedly witnessed our tax dollars wasted on so-called stimulus projects that have ended in bankruptcy,” Blackburn said. “Even worse, we now have a situation where not only has A123 landed in bankruptcy proceedings but their taxpayer-funded technology could be handed over to the Chinese government. We owe it to the American people to, at a minimum, scrutinize potential acquisitions to assess the threat to the United States and the loss of taxpayer funded intellectual property.”

Concerns over the sale have been a bipartisan issue on Capitol Hill where Democrat and Republican senators have written Treasury Secretary Timothy Geithner warning the acquisition presents considerable risks.

Congress in the 1970s gave the president the authority to block business transactions deemed a threat to national security. The most prominent decision by CFIUS was approval of the Dubai port deal in 2006. However, the Senate voted to block the deal through new legislation and the port operations were eventually sold to a U.S. company.

Most recently, CFIUS blocked the Chinese energy developer Ralls Corporation from investing in an Oregon wind farm. The company filed a lawsuit against the committee in September challenging its authority.

“We know we’re fighting an uphill battle,” Popps said.

“The Chinese are all over us in a hundred different ways, from currency manipulation to what’s going on in Africa – the last battleground for us,” said Popps, referring to China’s efforts to acquire large tracts of African farmlands to increase their food source.

“That’s the next battleground over the next 25 years; it’s going to be over natural resources—who’s got water, who’s got food, who’s got energy and these guys know it and they’ve set out aggressively to control all of the supply chains,” Popps said.

The Chinese have already made a significant push into the U.S. economy with renewable energy technology, and control roughly 98 percent of the world’s rare earth minerals that are essential components in green and high technology, such as hybrid cars, iPods and solar panels.

“There are so many high tech requirements for rare earth components that we now don’t control, and even worse, we’re not even allowed to mine for them because of billions of dollars of costs from EPA constraints,” Popps said. “The supply chain has itself between a real rock and a hard place, and it’s time to have a national discussion about this.”

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And The Massive, Obama-Funded, Green Energy Failures Just Keep Coming

Electric Car Battery Maker A123 Systems Files Bankruptcy – Bloomberg

A123 Systems Inc. (AONE), the electric car battery maker that received a $249 million federal grant, filed for bankruptcy protection and said it would sell its assets to Johnson Controls Inc. (JCI) .

The filing may fuel a debate over government financing of alternative-energy and transportation businesses. Federal grants and loans to companies including A123, Fisker Automotive Inc. and Tesla Motors Inc. (TSLA) have drawn scrutiny from congressional Republicans following the September 2011 bankruptcy filing of solar-panel maker Solyndra LLC two years after it received a $535 million loan guarantee from the U.S. Energy Department.

“This action is expected to allow the company to provide for an orderly sale of the automotive business assets and all other assets and business units,” A123 said in a press release. Johnson Controls plans to acquire A123’s automotive business assets in a deal valued at $125 million and will provide financing of $72.5 million to support A123’s continued operations, according to the release. A deal to sell a majority stake to a Chinese company fell through, A123 said.

The company listed assets of $459.8 million and debt of $376 million as of Aug. 31 in Chapter 11 documents filed today in U.S. Bankruptcy Court in Wilmington, Delaware.

The Waltham, Massachusetts-based company said yesterday it expected to fail to make an interest payment due yesterday on $143.8 million of notes expiring in 2016.
Shares Fall

A123 fell as much as 18 cents, or 76 percent, to 6 cents a share in over-the-counter trading as of 12:00 p.m.

A123, which received a $249.1 million federal grant in 2009 to build a U.S. factory, needed a financial lifeline after struggling with costs from a recall of batteries supplied to Fisker, the plug-in hybrid luxury carmaker. A123 announced in August that it was working on a deal with Wanxiang Group Corp., China’s largest auto-parts maker, for financing in exchange for a majority ownership stake.

“We determined not to move forward with the previously announced Wanxiang agreement as a result of unanticipated and significant challenges to its completion,” David Vieau, A123’s chief executive officer, said today in the company’s statement. Wanxiang had planned to invest as much as $465 million in A123, giving the Hangzhou, China-based company a stake of as much as 80 percent, A123 said in an Aug. 16 statement.

Johnson Controls

Johnson Controls plans to acquire A123’s automotive business assets, including its facilities in Livonia and Romulus, Michigan. The Milwaukee, Wisconsin-based company also will obtain A123’s cathode powder plant in China and its equity interest in Shanghai Advanced Traction Battery Systems Co., A123’s joint venture with Shanghai Automotive Industry Corp.

“Our interest in A123 Systems is consistent with our long- term growth strategies and overall commitment to the development of the advanced battery industry,” Alex Molinaroli, president of Johnson Controls Power Solutions, said in today’s statement. “We believe that A123’s automotive capabilities are a good complement to our existing portfolio.”

A123 has used $132 million of the $249.1 grant awarded by the U.S. in 2009 toward building the two Michigan factories, the Energy Department said today in a posting on its website. A123 was required to spend up to one dollar of its funds for every incentive dollar received from the government, according to regulatory filings. The company also received a $6 million grant from the George W. Bush administration in 2007.

10 Facilities

A123 and its debtor and non-debtor affiliates, collectively, have about 1,763 active employees, located in 10 facilities across the U.S., China and Germany, according to court papers. Its businesses consist of three primary business segments: transportation; grid energy storage; and commercial.

A123 Securities Corp., a non-operating company that holds a large portion of the company’s cash, and Grid Storage Holdings LLC, a shell entity formed “for the sole purpose of facilitating certain contemplated grid projects which ultimately were not completed,” also sought protection, according to court papers.

President Barack Obama called A123’s CEO Vieau and then-Michigan Governor Jennifer Granholm during a September 2010 event celebrating the opening of the plant in Livonia that the company received the U.S. grant to help build.

“This is about the birth of an entire new industry in America – an industry that’s going to be central to the next generation of cars,” Obama said in the phone call, according to a transcript provided by the White House. “When folks lift up their hoods on the cars of the future, I want them to see engines and batteries that are stamped: Made in America.”

Vehicle Sales

Electric-vehicle sales since 2011 totaled fewer than 50,000 through September, just 5 percent of Obama’s target to have 1 million such vehicles on U.S. roads by 2015.

The debtors’ two largest customers are Fisker and AES Energy Storage LLC and its affiliates, which accounted for about 26 percent and 24 percent of their total revenue during the year ended December 31, 2011, respectively, court papers show.

Republican presidential candidate Mitt Romney said last month that Obama has picked “losers” for alternative-energy loans and grants. His running mate, Paul Ryan, has called for all green-energy subsidies to be eliminated.

A123 has posted at least 14 straight quarterly losses. Its shares have fallen 85 percent this year to 24 cents at yesterday’s close in New York and traded at 16 cents at 8:29 a.m. before the start of regular trading.

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