Lawmaker intensifies fight to block sale of bankrupt former loan recipient to Chinese company

As the clock ticks down on a federal panel's review of the proposed sale of a bankrupt American electric car battery maker to the U.S. subsidiary of a Chinese auto manufacturer, one member of Congress is employing a full-court press to try to block the transaction.

Rep. Marsha Blackburn, (R-Tenn.), the new vice chairwoman of the House Energy and Commerce Committee, yesterday sent letters to the State Department and Pentagon warning that the sale of Waltham, Mass.-based A123 Systems to Wanxiang America Corp. may put the United States' economic and national security at risk.

Blackburn's letter follows a two-pronged legislative and public relations effort earlier this month designed to put pressure on the White House to block the sale through the use of the obscure Committee on Foreign Investment in the United States (CFIUS), which is reviewing the deal.

CFIUS is an interagency committee that reviews transactions that could result in control of a U.S. business by a foreign entity, in order to determine the effect it might have on U.S. national security interests. The committee, which is chaired by the secretary of the Treasury, has a policy of not talking about reviews that are under way.

"The department does not comment on information relating to specific CFIUS cases, including whether or not certain parties have filed notices for review," a Treasury Department spokesman said yesterday.


But A123 acknowledged in early December that the deal is subject to CFIUS's approval. And last week, A123 sent out an update noting that the company expects to close its deal with Wanxiang by Feb. 1. CFIUS reviews, by law, last 30 days, with a possible 45 days for a formal investigation.

The sale of A123 -- which, before it went bankrupt, received a $249 million grant from the Obama administration through the Department of Energy -- would include the transfer of all of the company's automotive, grid and commercial business assets to Wanxiang. But it would not carry with it A123's U.S. military contracts. Those assets are set to be sold to Woodridge, Ill.-based Navitas Systems LLC for $2.25 million.

But Blackburn and others on and off Capitol Hill have argued that it is impossible to separate A123's military and commercial intellectual property.

In her letters to Defense Secretary Leon Panetta and Secretary of State Hillary Rodham Clinton -- who represent their agencies on CFIUS -- Blackburn notes that certain A123 military-grade products were built leveraging the company's commercial products and technologies. She questioned whether the underlying technical data used for A123's military products would be protected if the company were allowed to be sold to Wanxiang.

"As the United States re-balances its global force posture and increases its focus on the Asia Pacific region, it would be the height of folly to allow a Chinese company -- and potentially the Chinese military -- to gain insight into, and access to critical U.S. energy-related capabilities," Blackburn said in the letter.

Representatives for A123 and Wanxiang did not return calls for comment yesterday.

Earlier this week, Blackburn used Obama's own words from his inaugural address to argue that the president -- who has final say over CFIUS actions -- should block the deal.

In his address, Obama stated "we cannot cede to other nations the technology that will power new jobs and new industries. We must claim its promise."

Blackburn said that if Obama "is truly serious about his pledge to the American people then he has no option but to block the sale of A123 to Wanxiang. This is the first test for the Obama administration's second term, and we will be watching closely to see if the president's words are going to carry any weight."

The Strategic Materials Advisory Council (SMAC), which is composed of former U.S. military leaders and clean-tech advocates, has also argued for pulling the plug on the A123 deal.

This week, the group pointed to the high-profile grounding of Boeing 787s over concerns about their lithium-ion battery technology as an example of how vital advanced battery manufacturing is to U.S. security.

"This is exactly the science the President was talking about" in his inaugural address, Dean Popps, the council's co-chairman and a former Army acquisition executive, said in a statement. "This science will power our satellites, unmanned military drones and our soldiers in the field. This highly sensitive technology with key military applications should not be handed over to China."

Noting the quarter-billion-dollar DOE investment in A123, Popps said that "American taxpayers own this technology; we paid for it and, like the President said, we should claim its promise."

Earlier this month, Blackburn introduced legislation aimed at preventing unfriendly countries from benefiting from DOE research dollars awarded to domestic businesses.

Blackburn's bill, which has earned a handful of co-sponsors in the House, would require companies that receive federal research funds from DOE to report if they are being acquired by a non-allied foreign nation and also require the secretary of Energy to report to Congress whether such an acquisition would represent a threat to the United States.

The bill -- dubbed the "Stop Mergers, Acquisitions and Risky Takeovers Supplied by American Labor and Entrepreneurship Act" ("SMART SALE Act") -- would also require the development of a repayment plan for any DOE grant or loan issued to such a company.

DOE said in a statement after the A123/Wanxiang deal was announced that agency officials had worked through the bankruptcy process to ensure that the plants and equipment that were partially paid for with DOE grant money would remain in the United States.

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