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Chinese Firm Offers To Invest In A123

Intellectual Property: Proposed deal raises U.S. security concerns

by Marc S. Reisch
August 14, 2012

Credit: A123 Systems
A123 Systems puts a nanophosphate coating on its cathode material.
Photo of a nanophosphate coating being applied to cathode material.
Credit: A123 Systems
A123 Systems puts a nanophosphate coating on its cathode material.

A123 Systems, a financially struggling maker of lithium iron phosphate batteries, is in talks with the Chinese auto part maker Wanxiang Group about a deal in which the Chinese firm would invest up to $450 million in A123 in exchange for an 80% ownership stake.

The deal is likely to run into opposition from U.S. lawmakers, one of whom notes that A123 built an advanced technology battery plant in Michigan with the help of $249 million in grants from the U.S. government.

“It appears the Department of Energy and the Obama Administration have failed to secure sensitive taxpayer-funded intellectual property from being transferred to a foreign adversary,” says Rep. Cliff Stearns (R-Fla.). Stearns was also a critic of the government’s investment in the now-bankrupt solar cell maker Solyndra.

A123’s intellectual property includes what it calls a “game changing” battery that overcomes limitations of competing lead-acid and lithium nickel manganese cobalt oxide batteries. The company says the battery would be ideal for microhybrid passenger cars—a new type of gasoline-powered vehicle with an engine that turns off at stoplights.

A123 didn’t address technology concerns when it announced the proposed investment, instead emphasizing that the deal would remove uncertainty regarding the firm’s financial situation. “A substantial capital investment from Wanxiang would not only provide financial stability to A123 as we continue to grow, but it would also align us with a large, successful global brand in the automotive and cleantech industries,” says A123 CEO David Vieau.

A123 has been experiencing financing difficulties for some time because sales of electric vehicles containing its batteries have lagged earlier predictions. A $52 million defective battery recall also hurt. In May, the firm filed a document with the Securities & Exchange Commission in which it raised “substantial doubt on the company’s ability to continue as a going concern.”


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