Stimulus-backed battery company A123 Systems filed for bankruptcy in October, after a deal to secure loans in exchange for equity from a Chinese auto company, Wanxiang Group, fell through. It’s unclear exactly why the deal didn’t happen in time for A123 to make the financing payments necessary to avert bankruptcy, but it was surmised that it was delayed by the U.S.’s Committee on Foreign Investment, which became involved in the final version of the rescue because of, apparently, the valuable intellectual property A123 held (advanced battery technology) and Wanxiang’s request for guarantees that the federal stimulus grants that the company hadn’t received yet (about $130 million of the promised $249 million) would still be coming through under Chinese ownership.

Well, so much for that:

Wanxiang Group, a large Chinese auto parts maker, won a high-stakes auction on Sunday for assets of A123 Systems, the bankrupt American battery maker that was a centerpiece of the Obama administration’s loan program for electric vehicles.
A123, which filed for bankruptcy in October after chronic losses and a damaging battery recall, said Wanxiang agreed to pay $256 million for its automotive and commercial operations, including its three factories in the United States.
But the sale excludes A123’s business with the United States government and its military contracts. That portion of the company will be sold to a small energy company based in Illinois, Navitas Systems, for $2.2 million.
Spinning off the government-related business to an American buyer was meant to quell concerns about transferring sensitive military technology to the Chinese, said A123’s chief executive, David Vieau.

But the deal still does require the approval of the commission which delayed the original rescue deal

In addition to the approval of the bankruptcy judge, the deal requires the approval of the Committee on Foreign Investment in the United States, a broad-based group led by the Treasury Department that reviews foreign takeovers of American companies. . . .
The company’s bankruptcy became a political issue in the recent presidential campaign, and its potential sale to Wanxiang has fueled concerns that China will benefit from technology developed with financing by American taxpayers.
One member of Congress, Marsha Blackburn, Republican of Tennessee, wrote in a blog, “The Hill,” on Friday that any sale of A123 to the Chinese had “significant implications” for American national interests.
At least two dozen other members of Congress have also opposed the deal, along with the Strategic Materials Advisory Council, a group of former American military and industry leaders.
“The writing is on the wall,” Ms. Blackburn wrote. “The administration must review and then reject any deal involving Wanxiang.”

Because the Committee on Foreign Investment’s decisions are secret, we may not know exactly what influence various congressmen exert over their decision, and whether that decision eventually determines whether Wangxiang’s acquisition goes through. It’s also not clear what the committee will decide, since it appears to have been merely delays, not a rejection, which prevented A123 from getting the loans necessary to continue operation. If CFIUS does let it through, however, the president himself can intervene as well, and he’s already done that once, blocking the installation of Chinese wind turbines at a small Oregon wind farm near a Navy testing facility. Given the potential embarrassment of a stimulus-funded firm being acquired by a Chinese company, it wouldn’t be terribly surprising for Obama to block this deal, too — the concerns CFIUS seems to have already found could partly go to justify his decision.