Johnson Controls Casts Doubt on A123's China Sale

By · December 20, 2012

A123 battery

A123's cells showcase nanotechnology sourced from MIT. (A123 photo)

“We think the battery electric car will continue to be delayed. It’s still 10 years until mass-market adoption.”

Alex Molinaroli
Johnson Controls Power Solutions President

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.

Alex Molinaroli

Alex Molinaroli: big on batteries, skeptical about electrics. (Johnson Controls photo)

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.”

Comments

· · 1 year ago

Johnson Controls will continue to bid less and less, and hold up the sale to China, while China also continues to bid less and less. It's not clear who will win this particular war of attrition, but it is quite clear who loses: A123 investors, A123 bondholders, and "We, the People of the United States of America"....

· William Howland (not verified) · 1 year ago

As far as 48 volt systems go (I'm assuming 56 volts floating), this sounds like GM's dopey '42 volt' system (36 volt if you want to be analogous to 48 volt) they were hawking a decade ago.

15% increase in fuel economy? by going from 12 to 48 volts?

I don't recall any increase in fuel economy when the industry changed from 6 to 12 volts (incidentally, I think the DRIVER of THAT change was 12 volt B+ tubes allowing for much much cheaper, physically smaller (no transformer, vibrator, rectifier) auto car hybrid radios, and that drew only 2 amps rather than 6 ( or, 12 amps if you were talking about a 6 volt car).

I think the 15% increase isn't going to be there, I'd love to see them justify it..

My '64 VW didn't have either problem... The 6 volt radio was an energy efficient Class AB2 transistor Blaupunkt radio.

· Anonymous (not verified) · 1 year ago

The system will probably use a 16s, 20 Ah A123 LiFePo4, 1 kWh pack, at the weight of the current lead acid battery...52 volts, 48 volts under load.

The 15% efficiency gain will come from the "soft hybrid", start-stop system. They sell very well in Europe already, and the US makers have them as an option, or sitting on the shelf, waiting for the demand. The mileage goes up and emissions drop, in stop and go traffic. It is a cheap add-on to any car. This will go a long way to meeting the new CARB standards, for a fraction of the price of an EV, or even a regular hybrid.

· · 1 year ago

@Anonymous

So you are saying this 'soft hybrid' will have as the sole battery in the car, a 48 volt model? So the acceleration and regen will have to go into the same battery handling accesories? If so, that's the only thing that would make sense for this system.

The US automakers have plenty invested in split systems though, so it will be interesting if they feel like changing. More parts to stock at auto suppliers also, more jumping devices to stock, etc.

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