JCI might still pursue A123 if Wanxiang bid is rejected
DETROIT -- Wanxiang Group Co., China's largest auto supplier, won the auction to buy most of the bankrupt assets of A123 Systems Inc. last weekend for $256.6 million.
But competing bidder Johnson Controls Inc. maintains its interest in A123's automotive assets -- including plants in Livonia and Romulus, Michigan -- as Wanxiang's bid could be nullified by the U.S. government, said Alex Molinaroli, president of JCI's power solutions business unit.
The U.S. Department of Energy, which funded $132 million of a $249.1 million federal grant to Waltham, Mass.-based A123, says it has liens on the property and equipment and the winning Wanxiang bid must be approved by the Committee on Foreign Investment in the U.S.
The Chinese supplier was unable to secure CIFIUS' approval on a $465 million pre-bankruptcy agreement to buy 80 percent of A123, which forced an insolvent A123 into bankruptcy in October.
"It seems to me if Wanxiang was going to get government approval, it would have happened before bankruptcy so no one had to go through this mess," Molinaroli said. "They are spending money on assets they don't know if they can keep and if that happens that's where someone like us comes in."
JCI raised its stalking horse bid of $125 million during auction, but bowed out in hopes the government doesn't approve the Wanxiang bid, Molinaroli said.
Wanxiang certainly is seeing opposition from U.S. Congress.
In an emailed statement, U.S. Sen. Debbie Stabenow, D-Mich., said she opposes the sale of A123 to Wanxiang over anti-competitive practices by the Chinese.
"I do not support A123's sale to Wanxiang because there are serious questions about the potential effect on U.S. national security and Michigan's economy from the technology transfer," she said. "With China's history of anti-competitive practices, we have to make sure that our businesses' intellectual property is safe."
Molinaroli said: "The government is concerned about jobs, regardless of what people (Wanxiang) promise. The Chinese company, they have these assets that the government may or may not have a lien on, they are gong to move wherever the market opportunity is; we don't know their real intent."
Molinaroli said JCI has intentions of maintaining the Southeast Michigan A123 plants -- which employed as many as 700 in September.
JCI's $251.1 million bid was a joint bid with Japan's NEC Corp., with JCI taking A123's automotive and commercial business and NEC taking its grid business.
Woodridge, Ill.-based Naviatas Systems has already acquired A123's Ann Arbor-based government business for $2.25 million, Bloomberg reported.