SHANGHAI (Reuters) - China's government has approved a plan by Wanxiang Group Corp., a major Chinese auto parts maker, to acquire bankrupt U.S. battery maker A123 Systems Inc., although a deal still hinges on the outcome of an auction next month and U.S. government approval.
A123, a maker of lithium ion batteries for electric cars, filed for Chapter 11 bankruptcy protection in October with a plan to sell its battery business to Johnson Controls for $125 million.
The planned sale will depend on whether better bids are received at next month's auction. Wanxiang has said it intends to make a bid.
China's National Development and Reform Commission, whose approval is required for major overseas acquisitions by Chinese companies, said in a statement posted on its website on Friday that it had approved Wanxiang's plans for a bid.
Any deal for A123 must receive the blessing of the U.S. government, however, as the company has received a $249 million grant from the Energy Department.
Republican Senators John Thune and Chuck Grassley have raised concerns about Wanxiang's attempt to acquire A123's battery business, saying military and taxpayer-funded technology should not be allowed to fall into foreign hands.
The Energy Department has stressed that none of the government's grant would be allowed to fund facilities abroad.