By Tom Hals
WILMINGTON, Delaware (Reuters) - China's largest maker of auto parts won a politically sensitive auction for A123 Systems Inc
Timothy Pohl of Lazard Freres said Wanxiang Group Corp's bid of about $260 million topped a joint bid from Johnson Controls Inc
One U.S. politician was quick to warn about A123 and its sensitive, U.S. taxpayer-financed technology falling into the hands of a Chinese company.
"Given the thin line between Wanxiang and the Chinese government, I am concerned about the government of China having access to sensitive technologies being used by our military forces," said a statement from Congressman Bill Huizenga, a Republican from Michigan where A123 has plants.
The sale did not include parts of A123's business that works with the U.S. Defense Department, a source close to the deal said. That portion of the company went to another bidder, which the source did not identify.
The sale must be approved by Delaware Bankruptcy Court judge Kevin Carey at a hearing scheduled for Tuesday.
Opposition to the deal will likely focus on the Committee on Foreign Investment in the United States, which would need to approve the sale to Wanxiang.
U.S. politicians and retired military leaders have already pressed the government panel to reject Wanxiang.
Separately, the U.S. government has also said it must give its consent before its $249 million grant to A123 can be transferred to a new owner. The battery maker can still draw $120 million under various government grants, according to court records.
It was unclear if the grant would be transferred to Wanxiang.
A123, whose customers include Fisker Automotive, General Motors Co
Wanxiang has had its eyes on A123 for a while. The Chinese company struck a $465 million investment deal meant to save A123 from bankruptcy earlier this year. That agreement fell apart after A123 failed to meet certain criteria, according to court documents.
The Chinese company is no stranger to investing in the United States.
Wanxiang generates about $1 billion in revenue in the United States by supplying parts to GM and Ford Motor Co
Those past investments could help Wanxiang get approval to buy A123, but the deal will be closely scrutinized because it involves advanced technology, said Andrew Szamosszegi, who wrote the report for the U.S.-China Economic and Security Review Commission.
A123 filed for Chapter 11 bankruptcy protection in October.
The money from the auction will go toward paying off A123's creditors. The company listed liabilities of $376 million when it filed for bankruptcy.
(Editing by Peter Cooney and Jackie Frank)