Battery Power Politics

House Armed Services Committee raises national security concerns over sale of battery maker to Chinese company

A123 battery pack / AP
January 15, 2013

The House Armed Services Committee said that due to national security concerns it is closely monitoring the pending sale of bankrupt battery-maker A123 Systems to a Chinese firm.

"The committee is looking at this, first to ensure that [the Defense Department] has done their due diligence and has followed the appropriate process," a spokesman for committee chairman Buck McKeon (R., Calif.) told the Free Beacon. "Second, we are looking at potential impacts on DOD's mission. Our close monitoring of the issue continues as DOD investigates possible implications of this deal."

Chinese firm Wanxiang Group won a bid for high-grade lithium-ion battery producer A123 Systems in December, beating out the Wisconsin-based Johnson Controls. A123 Systems filed for bankruptcy in October after receiving $133 million of a $249 million stimulus grant from the federal government.

The Treasury Department’s Committee on Foreign Investment in the United States (CFIUS) must approve the sale. According to people close to the issue, CFIUS could rule on whether to approve the Chinese purchase as early as the end of the month.

The Defense Department is also reviewing the sale’s implications. A former national security official said the department’s final recommendation rests with deputy secretary Ash Carter.

"Ash Carter is liked by and seen by many Republicans and conservatives as a pretty straight shooter and he can be a hero for his department if he tells Tim Geithner and the rest of the bureaucrats to disapprove this monstrosity," the former national security official told the Free Beacon.

As previously reported by the Free Beacon, the sale of A123 Systems has raised national security concerns among many lawmakers and former defense officials who argue A123 Systems’ military and civilian technology can’t be separated.

The Department of Energy and Wanxiang say the firm’s military technology has been safely separated and sold to an American firm, Navitas.

However, opponents of the sale say the firm’s lithium-ion battery technology would still find its way into Chinese satellites and rockets and could potentially compromise U.S. electrical grids.

Two former chairmen of the House Armed Services Committee, Ike Skelton and Duncan Hunter, spoke out against the sale in a U.S. News & World Report op-ed Monday.

"If the Committee on Foreign Investment in the United States fails to act this time, Americans may soon find themselves depending on China for the battery power it needs to rebuild our energy grid and being watched from above by Chinese spy satellites powered by technology we paid for and developed," the former congressmen wrote.

Ike Skelton was a Democratic member of Congress and chairman of the U.S. House Armed Services Committee from 2007 to 2010 and Duncan Hunter was a Republican member and chairman from 2002 to 2006.

More than two-dozen members of Congress oppose the deal. Organizations such as the Strategic Materials Advisory Council, a group of former American military and industry leaders, and the U.S. Business and Industry Council (USBIC), a national business group representing 2,000 small and medium-sized manufacturing companies, also oppose the deal.

The CFIUS committee’s annual report to Congress released in December warned "there is likely a coordinated strategy" by unnamed foreign powers "to acquire U.S. companies involved in research, development, or production of critical technologies for which the United States is a leading producer."

The Defense Department and A123 did not immediately respond to requests for comment.