Johnson Controls Casts Doubt on A123's China Sale
“We think the battery electric car will continue to be delayed. It’s still 10 years until mass-market adoption.”
Will the sale of major American battery supplier A123 to Chinese auto parts giant Wanxiang eventually be approved, despite some pretty intense opposition? U.S. giant Johnson Controls, the leading domestic contender for the federally funded, Boston-based company, has filed an appeal. It’s obviously still hopeful that A123—supplier for the Fisker Karma, Smith Electric truck and the Chevrolet Spark—will come its way.
“This is Wanxiang’s third shot at it, and it’s not obvious that the sale to them will happen easily,” said Johnson Controls Power Solutions President Alex Molinaroli. “Wanxiang won the bid fair and square, we’re not arguing with that. The appeal is to recover $5.5 million we put up as part of the bid that’s now in escrow. But we’re not sure the deal will ultimately be approved. The military contracts can be spun off, but if the concern is the core battery technology that enables the company, then it’s a very difficult thing to remedy.”
Federal Grant is an Issue
Johnson Controls, a big player with 170,000 employees, wanted to pay $125 million for A123's assets, but Wanxiang was willing to pay $256 million. A123 received a $249 million Department of Energy grant, and that’s a major reason politicians, including U.S. Rep. Bill Huizenga (R-MI) are objecting to it.
Huizenga thinks the company’s tech can’t be easily separated. He posted on Facebook, “The technology developed by A123 is a core component to their work in the automotive, grid and telecommunications sectors. This core technology and intellectual property cannot be separated along A123’s business lines. Additionally, I have concerns regarding what safeguards are in place between Wanxiang and the government of China.”
The Wanxiang deal has to be approved by the Committee on Foreign Investment in the U.S., chaired by Treasury Secretary Tim Geithner. The sale is under a 45-day review, with a decision deadline of January 15. The committee has blocked other sales, including a bid by a Chinese-owned firm to build wind farms in Oregon and telecom deals from China’s Huawei Technologies.
It’s interesting to note that Johnson Controls is making a big bet on expanded use of batteries in vehicles, but it’s not all that sanguine about the short-term prospects of the plug-in car. It’s a major supplier of batteries, but for hybrids and micro-hybrids only. The latter have achieved takeoff in Europe—Johnson Controls supplied five million cars with start-stop technology there this year. “Start-stop hasn’t moved as quickly in North America,” Molinaroli said. “There’s about a year delay, but it will happen.” The company supplies Ford, Chrysler, BMW, Audi and others.
48-Volt Batteries Coming
Molinaroli thinks the next major application for cars will be 48-volt electric systems and batteries, which will enable not only increased use of electronics but also the powering of accessories (power steering for instance) while the engine is shut off. He said that a 48-volt system, targeted at a cost of $1,200, with a $700 battery, could achieve a 15 percent fuel economy benefit.
“We think the battery electric car will continue to be delayed,” he said. “It’s still 10 years until mass-market adoption.” Major gas price hikes or increased federal incentives could change the picture, he said. Right now, Molinaroli said, Chevy Volt and Nissan LEAF sales will only take off if the automakers sell them at a loss. “The companies can prove me wrong, but it would cost them a fortune," he said. “The data is speaking pretty loudly.”
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