U.S. says will not give battery maker A123 rest of grant

WASHINGTON (Reuters) - The Energy Department will not give battery maker A123 the remaining half of its $249 million grant, following the company's high profile bankruptcy and acquisition by a Chinese auto parts supplier, a department official said on Monday.

China's Wanxiang Group won an auction for most of the assets of A123, which makes lithium ion batteries for electric cars.

The department official, who asked not to be named because of the proceedings are ongoing, said this had been made clear to all parties involved in bidding for A123.

Once heralded by the Obama administration as a success story for American manufacturing, A123 faltered earlier this year after several technical missteps and weak demand for electric cars.

A123 received its grant as a part of the Obama administration's $2 billion stimulus initiative to jump start domestic battery manufacturing.

Energy Secretary Steven Chu even visited one the company's plants in 2010. But eventually A123's financial problems became political fodder for Republicans blasting the administration's clean energy investments.

The company had received about $133 million of its $249 million grant when it filed for bankruptcy protection in October.

A123 and Wanxiang did not immediately respond to requests for comment.

Despite A123's sale to Wanxiang, the department official stressed that the conditions of the grant require taxpayer funded equipment and facilities to remain in the United States.

More than a dozen lawmakers have raised concerns regarding Wanxiang's takeover of A123, which will need approval from the Committee on Foreign Investment in the United States (CFIUS).

CFIUS, an inter-agency panel that vets foreign deals for security concerns, is headed by Treasury Secretary Timothy Geithner.

Critics have argued that A123's technology should not be allowed to go to the Chinese, particularly since A123 received government funding.

'The review process at the Treasury Department is the last hope for ensuring some regard for U.S. interests,' Republican Senator Chuck Grassley of Iowa said in a statement.

Grassley and Republican Senator John Thune of South Dakota have repeatedly raised concerns about Wanxiang's pursuit of A123 and the government's grant to the battery maker.

Wanxiang did not purchase A123's politically sensitive business that works with the U.S. Defense Department, which lawmakers had said would pose a threat to national security.



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