wanxiang group corp. Chinese company is facing scrutiny

September 2, 2012 at 12:00a.m.

Chicago Tribune

CHICAGO

A Chinese industrial conglomerate with Chicago-area ties has historically invested a lot like Warren Buffett. It looked for value in aging assets, in some cases providing financial lifelines to hard-hit auto suppliers, saving jobs and injecting life into the decaying Midwest.

But as Wanxiang Group Corp. expands into emerging clean-energy technologies, it faces new scrutiny that threatens to smudge its white-knight reputation.

Wanxiang’s agreement to invest up to $465 million in A123 Systems Inc., a struggling maker of high-tech batteries, has raised concerns about cash-rich Chinese companies siphoning American innovation for the benefit of China.

Wanxiang also has gotten caught in the middle of a simmering political debate about government financing of alternative-energy businesses.

A123, based in Waltham, Mass., won a $249.1 million federal grant in 2009 that allowed it to open factories and create hundreds of jobs in Michigan.

It also is expected to receive up to $100 million in tax credits from Michigan.

“It appears the Department of Energy and the Obama administration have failed to secure sensitive taxpayer-funded intellectual property from being transferred to a foreign adversary, which raises serious national security issues,” U.S. Rep. Cliff Stearns, a Florida Republican, said.

Recently, Republican Sens. Chuck Grassley of Iowa and John Thune of South Dakota sent a letter to Energy Secretary Stephen Chu questioning whether American tax dollars would benefit A123’s new Chinese investor.

“Billions of U.S. taxpayer dollars have flowed to foreign companies through the Recovery Act, and we are concerned that the recent announcement could lead to even more taxpayer dollars going overseas,” the letter said.

The Obama administration has a difficult decision ahead.

If it rejects Wanxiang’s investment, A123 could go out of business, resulting in the loss of about 1,200 jobs, including 900 in Michigan.

If it approves the deal, a taxpayer-funded business will fall into the hands of one of China’s largest private companies that wants to supply the Chinese market and has outsourced U.S. jobs.

Jen Stutsman, spokes- woman for the DOE, said funding will only be allowed to support U.S. manufacturing and jobs. “Because of the administration’s investment in the domestic battery industry, we are building fuel-efficient cars here at home, reducing our reliance on foreign oil and supporting new manufacturing jobs across the country,” she said.

The president of Wanxiang’s Elgin, Ill.-based U.S. operations is taking the criticism in stride.

“This kind of thing doesn’t bother us,” said Pin Ni, the son-in-law of Wanxiang’s founder. “We’ve been investing in the United States for a long time.”

Republicans’ concerns have stirred more than election-year politics. Wanxiang’s deal, which may give it an 80 percent stake in A123, has stoked a broader debate about American competitiveness and potential consequences of foreign investment in this country.

Michael Dunne, a Hong Kong-based consultant and expert on China’s auto industry, wrote an op-ed piece in a Wall Street Journal blog that called Wanxiang “a clever opportunist in the unfolding tragedy of American competitiveness.”

Dunne sees a troubling pattern emerging. “America develops technology — subsidized with generous tax dollars — only to see it purloined, borrowed or, in this case, purchased on the cheap by firms from competing nations.”

On the other hand, Joseph Sternberg, an editorial writer for The Wall Street Journal Asia, questioned the wisdom of buying struggling Western companies.

He wondered if China’s buying spree could result in the “world’s greatest technological junkyard.”