Great news: Obama green-tech stimulus recipient might end up in China's hands

Two months after Barack Obama’s green-tech stimulus recipient A123 went bankrupt, losing close to $135 million in federal grants, taxpayers may finally have some good news. When A123 goes on the auction block, a buyer is already poised to snatch up the firm and perhaps provide a few cents on the dollar from Obama’s investment.  The bad news?  The buyer is a firm in China, and that has some national-security implications:

A bankrupt battery manufacturer that was a cornerstone of President Obama’s effort to make the United States a global leader in clean-energy technology could end up in the hands of a Chinese company when it goes on the auction block Thursday.

Congressional Republicans call the company, A123 Systems, which received $133 million in federal stimulus grants, a textbook case of how the Obama administration wasted taxpayer money trying to nurture new industries. Administration officials say the stimulus money was used to build a new manufacturing facility in Michigan that could remain open under new owners, even if they turn out to be foreign.

The company also has a Pentagon contract classified as “secret,” and Sens. Charles E. Grassley (R-Iowa) and John Thune (R-S.D.) are waving red flags. In a letter to Treasury Secretary Timothy F. Geithner, they called for a review by the Committee on Foreign Investment in the United States, an inter-agency group that reviews transactions that might harm national security. Treasury oversees CFIUS.

The bidding war will come down to Wanxiang, which makes auto parts in China, and Johnson Controls.  Johnson Controls has already put pressure on the White House to tip the scales in their direction, claiming that the stimulus investment requires the sale to be approved by the Obama administration.  If so, that’s another good reason for Americans to demand that the federal government get out of the venture-capital business.

The key problem for the White House is the central role that A123 played in its effort to push-start the electric-vehicle industry, an analogy I chose deliberately.  Obama needed to make battery production radically cheaper to make EV economics work, especially since these cars will need full battery-system replacements in 5-8 years — and that costs as much as a brand-new economy subcompact now.  Instead, A123 couldn’t even make their battery systems work properly at current costs, which has derailed Fisker Automotive’s production plans — which also got millions of dollars from Obama’s stimulus program.

Now we may end up in the position of having American taxpayers fund what little innovation A123 achieved for the purpose of enriching China’s manufacturing sector.  Actually, thanks to the massive deficits incurred by this administration, it might be more accurate to say that China loaned us the money, which means they get the technology and the interest payments.  This is what is known as smart power, I believe.