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Chinese bid for A123 may raise security risks: Senators

By Ayesha Rascoe

WASHINGTON (Reuters) - A Chinese company's attempt to take over government-backed battery maker A123 raises serious national security concerns, a bipartisan group of lawmakers said this week, adding to growing congressional opposition to the deal.

China's Wanxiang Group Corp is currently competing with U.S.-based Johnson Controls Inc to buy bankrupt A123, which makes lithium ion batteries for electric cars.

The government must ensure that any sale of A123's technology, which has also been used by the military and to support the U.S. electrical grid, does not threaten domestic security, the senators said in letter to Treasury Secretary Timothy Geithner, Energy Secretary Steven Chu and other top cabinet officials.

Among the eight senators and one senator-elect signing the letter were influential Republican Rob Portman of Ohio and Democrat Dick Durbin of Illinois.

They called on the powerful Committee on Foreign Investment in the United States (CFIUS) to consider any "potentially harmful consequences that could occur as a result" of a sale to Wanxiang.

To acquire A123, Wanxiang needs approval from CFIUS, a U.S. inter-agency panel that vets foreign deals for security concerns.

Wanxiang's law firm Sidley Austin has said that it would submit its bid to CFIUS.

The lawmakers also raised concerns that Wanxiang could receive taxpayer funded assets from A123, which was awarded a $249 million grant by the Obama administration.

"The transfer of assets, technology and intellectual property, developed with American tax dollars, to a foreign company would be irresponsible," the letter said.

The U.S. government has argued in court that A123 cannot be sold without its consent since it received a grant from the Energy Department.

The government did not identify a preferred buyer in its court filing, but the administration has stressed that none of the government's grant would be allowed to fund facilities abroad.

Prior to filing for bankruptcy in October, A123 had received about half of its grant.

When the company filed for Chapter 11 bankruptcy protection in October its plan was to sell its battery business to Milwaukee-based Johnson Controls for $125 million.

This planned sale is subject to better bids at an auction in December. Wanxiang, an auto parts supplier, has said it intends to make an offer for the company.

Wanxiang's pursuit of A123 has been met with uneasiness from Congress. Other lawmakers such as Republican Senators John Thune and Charles Grassley and Democratic Senators Debbie Stabenow and Carl Levin have already voiced misgivings.

(Additional reporting by Ben Klayman; Editing by Bob Burgdorfer)

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