Gone to China
President Obama was determined not to let China run away with green energy technologies of the future. A case in point is the American battery maker A123 Systems. A123 makes batteries for electric and hybrid cars, and the electric grid.
To help compete with China, the Obama administration gave $249 million to A123. Of course, the U.S. Treasury borrows billions from China. Money is fungible.
In an ironic twist, A123 filed for bankruptcy. In the bankruptcy auction, a Chinese conglomerate, Wanxiang Group beat American company Johnson Controls to buy A123 for $257 million. In a further ironic twist, Wanxiang generates large amounts of revenues from selling auto parts to General Motors and Ford.
The sale is subject to approval by the Committee on Foreign Investment in the United States (CFIUS). To win CFIUS approval, the U.S. military contracts held by A123 will be sold for $2.25 million in a separate asset purchase agreement to Navitas Systems.
It is a triple irony. The U.S. borrowed money from China to subsidize a battery company to compete with state-subsidized Chinese battery companies. The American company gets bought out by a Chinese company for about the same amount of money that the U.S. government gave it. The U.S. still has to pay the money back to China. The Chinese company buying the American company makes a lot of money by providing auto parts for the cars that Americans drive.
Previously Chinese subsidies damaged U.S. solar companies such as First Solar and SunPower. (For details please see: U.S. Wimps Out, Refuses To Fight Chinese Solar Dominance.)
About Me: I am an engineer and nuclear physicist by background. I founded two Inc. 500 companies, and have been involved in over 50 entrepreneurial ventures. I am the chief investment officer at The Arora Report, which publishes four newsletters to help investors profit from change. Write me: Nigam@TheAroraReport.com. Follow me here and get email notification when I publish a new article.
