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Senators seek thorough review of Chinese bid for A123

By Ayesha Rascoe

WASHINGTON (Reuters) - Two Republican senators asked U.S. Treasury Secretary Timothy Geithner on Thursday for a thorough review of a Chinese company's plan to acquire bankrupt battery maker A123, saying military and taxpayer-funded technology must be protected.

China's Wanxiang Group Corp is currently locked in a battle with U.S.-based Johnson Controls Inc to buy A123, which makes lithium ion batteries for electric cars.

A123 also had two contracts worth a total of more than $4 million to develop batteries for the Air Force, one of which is still ongoing, an Air Force official said.

Senators John Thune and Chuck Grassley said the powerful Committee on Foreign Investment in the United States (CFIUS), led by Geithner, should review the transaction to make sure U.S. military and taxpayer interests in A123 are protected.

To acquire A123, Wanxiang needs approval from the Chinese government and from CFIUS, a U.S. inter-agency panel that vets foreign deals for security concerns.

Wanxiang's law firm Sidley Austin said earlier this month that it would submit its bid to CFIUS.

The senators warned that if Wanxiang is allowed to buy A123, which was awarded a $249 million grant from the Obama administration, the Chinese company could gain access to the company's military contracts and potentially important grid storage technologies.

"A123 has received millions of taxpayer dollars to develop technology and intellectual property that should not simply be shipped to China," Thune said in a statement.

The Energy Department, which had hailed A123 as a model for revitalizing U.S. manufacturing, has stressed that none of the government's grant would be allowed to fund facilities abroad.

Prior to filing for bankruptcy in October, A123 had received about half of its grant.

Thune and Grassley had earlier raised questions in August about a failed attempt by Wanxiang, an auto parts supplier, to rescue faltering A123.

That $465 million rescue deal fell apart when A123 was unable to meet some conditions of the agreement.

Republicans have latched on to A123's bankruptcy as another example of the Obama administration's failed attempt to kickstart the U.S. clean energy sector.

The Obama administration has defended its efforts, arguing that despite some high profile bankruptcies, most of its investments have been successful and have to helped to double renewable energy output from wind and solar.

(Reporting by Ayesha Rascoe; Additional reporting by David Alexander; Editing by Tim Dobbyn)

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