The continuing saga of A123 Systems Inc. has culminated this past week in most of its assets being sold for US $256.6 million to the Chinese-owned Wanxiang America Corporation, an auto parts conglomerate.
The sale of A123 to Wanxiang had been in the works since this past August. But because of strong opposition from Washington politicians the final sale was delayed. The main objection to the sale centered on the fact that the US government had floated A123 a “grant” for $250 million as recently as 2009 to expand the company’s production capacity.
Why the US government would give a grant to expand the company’s production capacity when the market problem it faced was that its main customer wasn’t selling any of its own products is probably a worthy discussion. However, combating crony capitalism with more crony capitalism, which some U.S. Senators seemed engaged in with their fight to block the sale, hardly seems to be a solution.
There were concerted efforts by U.S.-based Johnson Controls Inc. to purchase the bulk of A123’s assets. But the prospect of paying Wanxiang back the $75 million the Chinese company had loaned A123 before A123's bankruptcy likely poured cold water on any other plausible deal.
For anyone seeking—from a U.S. nationalistic perspective—some sort of positive takeaway from the deal perhaps comfort can be taken in the news that Navitas Systems, an Illinois battery company, will get all of A123’s defense contracts.
I am sure that this sale is a bitter pill to swallow, especially for those who believe that national nanotechnology investments will translate into new jobs and economic growth. We have already seen how, after years of government investment in nanotechnology research and commercialization, the benefiting companies can be easily picked up for a song. Not just by shrewd investors, but by other governments.
The last U.S.-based nanotechnology-based Li-ion battery company to go bankrupt (Ener1) ended up being purchased by a Russian interest. Even the former CEO of Ener1 served as an advisor to Wanxiang in its purchase of the A123 assets.
Governments around the world are going to have to come to terms with the notion that investments in technology have a slim chance of producing jobs and economic growth within the region that happens to make those investments. It may in fact be the only the chance, but in the current innovation framework those chances remain slim. A123 beat the odds; it managed to turn a university research project into a commercial product. There just wasn’t any market for the product.
What governments should be doing is reexamining the entire innovation infrastructure. Apparently, they have not done this to date because there has been no pressure to do so. Sure, technology that has been languishing for years in research labs never seems to get to market, but nobody misses what wasn’t there in the first place. But once it leaves the lab for the marketplace there's something to miss: the millions—even billions—being spent without much to show for it.