(DETROIT FREE PRESS) - The assets of bankrupt battery-maker A123 Systems will be auctioned off today in a showdown between the U.S. and China over who controls a valuable technology that may give the winner a leg up in electrified transportation.
The bidding begins at $125 million between Johnson Controls of Milwaukee and Wanxiang Group, the largest maker of auto parts in China with North American headquarters in Elgin, Ill.
The auction pits the Obama administration and American military leaders against Chinese officials. Both countries see A123's technology as crucial to reducing gasoline consumption and, especially in China's case, addressing a horrendous air-quality crisis.
The Obama administration awarded a $249-million grant to A123 in 2009 under the American Recovery and Reinvestment Act. So far, the Department of Energy has disbursed $135 million of that, according to a bankruptcy court filing by the Department of Justice.
But A123, which has plants in Livonia and Romulus that hired about 1,000 workers through mid-2011, built more battery packs than demand for electric vehicles supports. Then it was forced to recall and replace battery packs shipped to its largest customer, Fisker Automotive. Waltham, Mass.-based A123 has not yet made a profit in its 11-year history and has lost about $300 million so far this year.
Johnson Controls, which itself was awarded $299 million in federal grants, wants to combine A123's technology with its own.
"With the bankruptcy of A123 Systems, Johnson Controls is one of the last standing American companies competing in and building this U.S. advanced battery industry," the company said in a statement.
Johnson Controls is shifting battery production from Nersac, France, to Holland, Mich., from which it will supply battery systems to its customers around the world.
A123 also has eight contracts with the U.S. Department of Defense. A coalition of former U.S. military leaders and industry experts in a Nov. 27 letter urged the Committee on Foreign Investment in the U.S. to thwart Wanxiang's bid: "Aside from the national security risk, American taxpayers should not pay for development of a technology that is freely transferred to a non-allied nation."
But it likely will come down to the highest bid.
"Bankruptcy judges are loathe to reject legitimate arms-length offers that will generate the maximum revenue for creditors and attorneys," said John Pottow, a bankruptcy expert and professor at the University of Michigan Law School.
The tug-of-war comes as the U.S. boosts support for energy storage technology. On Friday, Energy Secretary Steven Chu came to Chicago to announce a $120-million grant to Argonne National Laboratory to make batteries five times as powerful and five times less expensive in five years.
"You have to be in this game," Chu said last week. "If you say, 'No. There's a chance we're going to fail, therefore we'll let Japan, Korea, Germany, China, you name it, own this space,' then we will have failed."
Detroit Free Press