By on December 9, 2012

Wanxiang Group, China’s largest maker of auto parts won the auction for A123 Systems, Reuters says. The maker of batteries for electric cars was funded partly with U.S. government money, but went bankrupt nonetheless.

Investment banker Lazard Freres told Reuters that Wanxiang’s bid of about $260 million was better than a joint bid of Johnson Controls and Japan’s NEC.

Wanxiang supplies auto parts to many of China’s largest automakers. Wanxiang generates about $1 billion in revenue in the United States by supplying parts to GM and Ford Motor Co and has bought or invested in more than 20 U.S. companies, many of them in bankruptcy.

The sale must be approved by Delaware Bankruptcy Court judge Kevin Carey at a hearing scheduled for Tuesday. It also needs the approval of the Committee on Foreign Investment in the United States.

A213 also supplies the U.S. military, and there is opposition to a Chinese company having access to sensitive technologies being used the U.S. military.

However, the part of A123′s business that works with the U.S. Defense Department went to another unidentified bidder, a source told Reuters.

Quite interestingly, the $260 million are just a little more than the $249 million grant A123 has received from the U.S. government. It is not clear whether the grant can be transferred to a new owner.  Even more interestingly, A123 can still draw $120 million under various government grants, court records say.

A123 supplies batteries to Fisker. Fisker stopped production saying it needs to wait until the new owner of A123 has been determined.

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17 Comments on “China’s Wanxiang Successful Bidder For Government-Backed A123...”


  • avatar
    billfrombuckhead

    The Chinese, Japanese and Koreans make a mockery of free trade and capitalism. One day Americans will come out of their Faux News bubble and find out everything of value will be owned by the People’s Liberation army or some zaibatsu or cheabol.

    • 0 avatar
      highdesertcat

      That’s already happening because bad is bad no matter what language or continent applies. The bottom line is that so many government ventures have failed, are failing and will continue to fail in the future. That’s not Faux News. That’s the real world.

      But they will be of great value to the foreigners who buy them up, cheap.

      A perfect example is the company formerly known as Chrysler. Now under Italian ownership it is flourishing and highly profitable to the point it is keeping their parent company alive, thanks to the taxpayer bailout and the $1.3B bribe paid Fiat to take that puppy off our hands.

      Imagine if we had done the same for GM instead of nationalizing it and holding on to it. The A123 story is no different. Neither is the Solyndra story nor any of the stories of failed government-backed ventures.

      If there was a better way to do something, private enterprise would have done it. And I have no doubt that in the hands of the foreign owners A123 will also flourish and grow and in fact be profitable sooner rather than later. If they couldn’t do it, they would not have bid on it.

    • 0 avatar
      el scotto

      I disagree. The Chinese have a day of reckoning coming. No society will put up with millionaire communist party officials forever. I think the PLA is out of a lot of commercial ventures, too much money to be made by run o the mill communists. China is famous for making cheap, shoddy stuff. Korea is still in the stages of it’s cheap but it’s not quite as good. Hardly the standard for world leadership for either China or Korea. Japan has issues with an aging population, the yen dropping like a rock, and deflation/stagnation. All three countries are economic threats/rivals. To say they make a mockery of capitalism is incorrect. It’s just not the American version of capitalism.

      • 0 avatar
        highdesertcat

        “It’s just not the American version of capitalism.”

        You hit the nail on the head right there, dude! No matter how we, as Americans, deride the quality of the goods coming out of these countries, those goods are good enough for them and their market and will be making a lot of money for the entrepreneurs. Economies of scale!

        And come to think of it, those cheap, foreign-made goods sold at Wal-Mart, K-Mart and other Big Box stores actually allowed millions of Americans to improve their lifestyle as well by providing them goods at low prices that they otherwise would not be able to afford if they had been union-made in the good ol’ US of A; like cars, TVs, electronics, phones, laptops, PCs, clothing, furniture, appliances, and the list goes on ad nauseam.

        I have found the shoddy merchandise made in China, Korea, Malaysia, Indonesia, or where ever, to be no worse and no better than American made merchandise. And at the prices I pay for the shoddy foreign-made stuff, if it breaks, I’ll buy another new one. We’ve become a throw-away society.

  • avatar
    rnc

    In germany I noticed (and this was something that I looked for) that the low-cost goods were made in Korea by majority, not china per se. Just as in the US, it started with Japan, then Taiwan (Cantonese), followed by Korea and finally China (Manderon). But in Germany low-cost still =’ed Korea (I mean fireworks and low crap other stuff, guess they don’t read the back of thier iphones (unless Apple is using the famous 80′s Walmart routine, goods built in sweat-shop, american made tags attached =’ed “made in america”.

    • 0 avatar
      Dynasty

      I don’t quite understand why a foreign company was allowed to buy technology funded by US taxpayer dollars.

      Isn’t that an extreme conflict of interest?

      • 0 avatar
        Chicago Dude

        The spirit of the law says that if Wanxiang moves battery production out of the US, any new US company can move in and start using their patents if they build the batteries in the US. I would be very surprised if Wanxiang has any plans at all to move the factories.

        Title 35, United States Code, Part II, Chapter 18 (PATENT RIGHTS IN INVENTIONS MADE WITH FEDERAL ASSISTANCE)

        Section 200 (Policy and objective):
        It is the policy and objective of the Congress to use the patent system to promote the utilization of inventions arising from federally supported research or development; to encourage maximum participation of small business firms in federally supported research and development efforts; to promote collaboration between commercial concerns and nonprofit organizations, including universities; to ensure that inventions made by nonprofit organizations and small business firms are used in a manner to promote free competition and enterprise without unduly encumbering future research and discovery; to promote the commercialization and public availability of inventions made in the United States by United States industry and labor; to ensure that the Government obtains sufficient rights in federally supported inventions to meet the needs of the Government and protect the public against nonuse or unreasonable use of inventions; and to minimize the costs of administering policies in this area.

        Section 204 (Preference for United States industry):
        Notwithstanding any other provision of this chapter, no small business firm or nonprofit organization which receives title to any subject invention and no assignee of any such small business firm or nonprofit organization shall grant to any person the exclusive right to use or sell any subject invention in the United States unless such person agrees that any products embodying the subject invention or produced through the use of the subject invention will be manufactured substantially in the United States. However, in individual cases, the requirement for such an agreement may be waived by the Federal agency under whose funding agreement the invention was made upon a showing by the small business firm, nonprofit organization, or assignee that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible.

  • avatar
    gslippy

    I’m surprised. I guess Wanxiang sees something of value (ie, a way to make money from this) that I don’t.

    Good for them; this may actually bode well for the EV market.

    Incidentally, I don’t know how you can spin off the military portion of the business to a different owner and expect it to work. There are economies of scale by keeping it under one roof which evaporate this way, whether we’re talking about only the technology or the mfg as well. The US military will now be paying more for whatever A123 had been selling them.

    • 0 avatar
      el scotto

      #gslippy http://www.a123systems.com/6t-battery-military-battery-systems.htm Looks like they’re making mil-spec/NATO spec batteries for vehicles. Our combat stuff is supposed to be American made: http://en.wikipedia.org/wiki/Berry_Amendment. I still contend MREs and high quality wet dog food are made at the same plant :)

    • 0 avatar
      highdesertcat

      “I guess Wanxiang sees something of value (ie, a way to make money from this)”

      Of course they do! Even if everything they produce is to supply their own national/internal market, it keeps them from having to import batteries from elsewhere around the globe for their future EVs.

      The Chinese are not stupid and they will want to replace innercity traffic with as many EVs as they can in the coming decades.

      They are ideally positioned to do this because their electrical-generating expansion is not hampered like it is in America, by the EPA, the green weenies and the tree huggers. China doesn’t give a damn about what the rest of the planet thinks because they are going to grow and develop in a way that is best for China.

      China will generate electricity for its growth and expansion any way it can, using everything at its disposal. Battery-tech, even outdated battery tech, is just another step towards self-sufficiency. Another is their license agreements with different and diverse nations around the globe to supply China with oil.

      The only thing that rubs me wrong is that A123, like Solyndra, is funded by the American tax payers, because of Obama, his administration and their belief in government venture capitalism. The American taxpayers wouldn’t do it for American firms but because of Obama they are doing it for foreign nations.

      But that’s what the majority wanted in 2008 and 2012. And the majority rules in America. America got exactly what it deserves. America voted for it.

      • 0 avatar
        corntrollio

        Bitter much? So far America has voted and gotten better results than actual venture capital firms, so good job, America.

      • 0 avatar
        highdesertcat

        Not bitter at all. Don’t care either way. Instead of paying in, I am now taking out.

        Life is good! I worked for it. I earned it. I’m collecting! Yep, life is very good! I actually get a raise from the government in Jan 2013! I’ll take it. Y’all voted for it. You bet I’ll take it.

        I’m an Independent and I vote for the best candidate regardless of political party. This time I voted for Gary Johnson because neither Obama nor Romney appealed to me. A lot of Indies stayed home on voting day. At least I voted.

        I disagree with your statement “better results than actual venture capital firms”, but why would I care? I’m not paying for it. Only the people who work and have to pay taxes are supporting “exactly what America deserves”.

        About 49% are unwilling and reluctant supporters of bailouts, handouts, nationalization, redistribution of America’s wealth and government venture-capitalism. For them the new mantra has to be “Suck it up and deal with it!”

        But it doesn’t affect me and it doesn’t affect anyone who was smart enough to see this coming and took steps to shelter their money.

        Nope, I’m not bitter at all. I’ll be in Hawaii soon enjoying ‘me and mine’ for the Holidays and until the end of January 2013, so I’m about as far removed from the US government handing over A123 and all that taxpayer money to a Chinese firm.

        I may run into Obama though. I understand he likes to vacation in these parts.

      • 0 avatar
        corntrollio

        Somehow I don’t believe you. Someone doth protest too much. But ironic that you’re basically a ward of the government, by your own admission. If you can’t solve the problem, become part of it.

  • avatar

    I have two observations regarding the subject. First China today is what America used to be 100 years ago – i.e. dynamic and fast growing economic juggernaut capable of overproducing any other nation in the world. Rockefeller, Morgan, Carnegie and etc were richest people in entire world. American companies were biggest and richest. World was under assault from American companies. Of course fast growth comes at the price and cannot be sustained for extended period of time – it wears down national will to take risk and innovate at same rate. Today America is stagnant economy which shrinks or at best grows 2% a year and many American prefer welfare to taking risk or simply working hard. Reelection of Obama for second term despite failure of his economic policy is symbolic for current state of affairs in America.

    China is the new America – they work hard, innovate, take risk and deserve to be #1 nation in the world and buy whatever companies they can afford around the world. No need to panic though they will wear out over time like everyone else and become just other stagnant economy like Europe and America. You have to be happy that there is still nations in the world willing to take risk and advance humanity.

    Second observation is that A123 may be already outdated technology. It did not succeed for reason even despite free money from taxpayers. May be there is already scientist somewhere in the world most likely in China or Israel who is on his way to reinvent how electricity is stored in light weight and efficient way and who will create whole new industry. So A123 may be is just irrelevant. Chinese have too much money (like Ford in 90s) and that’s it.

  • avatar
    thelaine

    American taxpayers borrow money from the Chinese to subsidize a private company that then goes bankrupt and is sold to the Chinese, and we are still on the hook for the loan. Outstanding.

  • avatar
    corntrollio

    One part of the article I’d quibble with based on other reports. The DOE apparently made it quite clear to bidders that no one could draw down the other $116K of the loan that hadn’t been drawn down yet:

    http://www.chicagotribune.com/business/sns-rt-us-a123-sale-grantbre8b9127-20121210,0,6706352.story

  • avatar
    Lynn E.

    Geez, all this government talk. Batteries are heavy, even lithium batteries, and special licenses and packaging are required. Shippers are still afraid of lithium even though the new cells are far safer than the few, several years ago, with contamination problems.

    Having plants around the world for a battery manufacturer makes good sense and buying a bankrupt manufacturer and getting the trained workforce also makes good sense.

    Our tax dollars trained some Americans and now it looks like they will be working.


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