* Battery maker A123 received $946,830 on Oct. 16
* A123 says may ask for remaining grant money
* Received one government contract classified "secret" -A123
By Ayesha Rascoe
WASHINGTON, Nov 16 The Obama administration
provided struggling battery maker A123 Systems Inc
with nearly $1 million on the day it filed for bankruptcy, the
company told lawmakers investigating its government grant.
The company, which makes lithium ion batteries for electric
cars, filed for Chapter 11 bankruptcy protection last month
after a rescue deal with Chinese auto parts supplier Wanxiang
Group fell apart.
That same day, Oct. 16, A123 received a $946,830 payment as
part of its $249 million clean energy grant from the Energy
Department, the company said in a letter, obtained by Reuters,
to Republican Senators John Thune and Chuck Grassley.
In the letter, dated Nov. 14, A123 said the October payment
was the most recent disbursement it had received from the
government, with an additional $115.8 million still outstanding
on the grant.
Thune and Grassley have pressed the Energy Department for
more details about its funding of A123 as the company has
"The Department of Energy needs to answer for why it appears
to put federal grants on auto-pilot to the detriment of U.S.
taxpayers," the two senators said in a statement. "This can't
A123 said it may still need to use the rest of its grant
money if it decides to update or expand its current
"The Energy Department takes its responsibility to be good
stewards of the taxpayers' money very seriously," a department
spokesman, Bill Gibbons, said in a statement.
Under the department's grant program, companies receive
funds only after work is completed toward the ultimate goal of a
Gibbons said the department's investments have helped to
build U.S. advanced battery manufacturing, supported American
workers and ensured the country can compete in a fiercely
competitive global market.
Republicans on the campaign trail ahead of national
elections earlier this month pointed to A123 as an example of
failed clean energy investment from the Obama administration.
The Obama administration has defended its efforts, arguing
that despite some high-profile bankruptcies, most of its
investments have been successful and have helped to double
renewable energy output from wind and solar.
The administration launched a stimulus-funded $2.4 billion
initiative in 2009 to bolster U.S. advanced battery production,
but the sector has struggled with overcapacity and weak demand
for electric vehicles.
POTENTIAL CHINESE BUYER?
Thune and Grassley have also raised concerns about Chinese
firm Wanxiang's attempts 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.
Wanxiang, one of the largest non-government-owned companies
in China, is currently locked in a battle with U.S.-based
Johnson Controls Inc to buy A123.
Wanxiang had attempted to bail out A123 prior to the
company's filing for bankruptcy, but the $465 million deal
collapsed when A123 was unable to meet some conditions of the
The senators questioned why the Energy Department continued
to fund A123 even after it learned about the potential rescue
deal. The company said it informed the department about the
initial deal in early August.
A123 received several military contracts, including two
worth a total of more than $4 million, to develop batteries for
the Air Force.
In its letter to the senators, A123 confirmed it had
received one federal government contract with a "secret"
The company said that it would expect the Committee on
Foreign Investment in the United States (CFIUS) would lay out
conditions to protect sensitive U.S. military data if the
company is acquired by a foreign firm.
CFIUS is an interagency panel that vets foreign deals for