A123 Systems announced Sunday that Wanxiang would pay $256.6 million for all of A123’s technology, its manufacturing facilities in the United States and China, and its contracts with utilities seeking grid storage and automakers seeking batteries for electric and hybrid vehicles. (Jeffrey Sauger/Bloomberg)

Wanxiang America, the U.S. arm of a Chinese automotive parts giant, won the bidding for a bankrupt Massachusetts-based lithium battery manufacturer that was once hailed as a cornerstone of President Obama’s quest for American dominance in electric vehicles and battery technology.

A123 Systems announced Sunday that Wanxiang would pay $256.6 million for all of A123’s technology, its manufacturing facilities in the United States and China, and its contracts with utilities seeking grid storage and automakers seeking batteries for electric and hybrid vehicles.

Wanxiang would not acquire A123’s Ann Arbor, Mich.-based government business, which includes all of its U.S. military contracts. Those would be acquired for $2.25 million by Navitas Systems, a Woodridge, Ill.-based provider of energy storage products for commercial, industrial and government agency customers.

Wanxiang, which has been investing in the United States since 1994 and has 3,000 U.S. employees, beat out Johnson Controls and two foreign firms, Japan’s NEC and Germany’s Siemens. The Chinese company is one of China’s biggest private firms with worldwide revenue of $8 billion, and it said that this is its fifth “clean energy” investment in the United States this year.

Johnson Controls, whose bid for automotive and government businesses was paired with NEC’s bid for grid storage and commercial business, said it dropped out of the bidding on Saturday.

“Wanxiang’s offer was beyond the value of those assets to Johnson Controls,” Alex Molinaroli, president of Johnson Controls’ power solutions subsidiary, said in a statement Sunday. Johnson Controls makes lithium ion batteries for automobiles.

The auction, held at a Chicago law firm, had sparked criticism from some leading lawmakers and others who said that a classified A123 contract with the Defense Department was reason to block a Wanxiang purchase.

In addition, many GOP lawmakers used the auction of A123, which received $133 million in Energy Department grants under the American Recovery and Reinvestment Act of 2009, to allege that the Obama administration had made poor use of taxpayer money. Others said that a foreign company shouldn’t benefit from technology developed, in part, with public funding.

“This is the latest in a seemingly continuous cascade of predictable, super-sized clean-tech commercialization failures, which unfortunately hemorrhages our critical national technology and intellectual property advantages to the Chinese and other economic competitors,” said Andy Karsner, who under President George W. Bush was assistant energy secretary for efficiency and renewables with responsibility for vehicle technologies.

But Wanxiang’s top executive and an Energy Department spokesman said last week that the point of the economic stimulus grant was to create jobs by building a Michigan manufacturing facility, which Wanxiang said it plans to keep open. The money was not for research, the Energy Department said.

“We think adding A123 to our portfolio of businesses strongly aligns with our strategy of investing in the automotive and clean-tech industries in the U.S.,” Ni Pin, president of Wanxiang America, said in a statement Sunday. “We plan to build on the engineering and manufacturing capabilities that A123 has established in the U.S. and we are committed to making the long-term investments necessary for A123 to be successful.”

Ni said last week that Wanxiang would not move jobs to China, where A123 has a manufacturing facility and owns a piece of Shanghai Advanced Traction Battery System, a joint venture with Shanghai Automotive. A123 spokesman Dan Borgasano said that about half the company’s 2,000 employees are in the United States and about half in China.

An individual familiar with Wanxiang’s plans said that the company could not be specific about jobs until it meets with A123 management, but that it is hoping to invest further in A123’s U.S. operations.

 A123 said Sunday that the total purchase price would fall short of the total amount owed to creditors. The company said that therefore its creditors would not recover any money and that its stock has no value.

The deal still requires approval from the U.S. Bankruptcy Court for the District of Delaware and the Committee for Foreign Investment in the United States, an interagency group overseen by the Treasury.

At the time it filed for bankruptcy in mid-October, A123’s automotive customers included Fisker Automotive, BMW, General Motors and Smith Electric, a maker of electric-powered delivery trucks.

Big utilities have also been buying lithium batteries for backup grid and renewable energy storage. A123 also sold to Arlington-based AES, Sempra Energy and Southern California Edison. Borgasano said A123 expected that more than half its revenue would come from grid and commercial applications.

In China, the company’s biggest customer is Shanghai Automotive, which is planning to use batteries in three models, one hybrid, one plug-in hybrid and one all-electric. Last month, it unveiled a small electric car, the Roewe E50.

A123 has also touted a technology that it says could surpass existing battery technology, but the company has not manufactured batteries using it.

Karsner said that was another reason to block the sale for national security reasons.

“It is no secret that the intellectual property around energy storage has both commercial and national security implications,” he said in an e-mail Sunday. “It is foolish to think that lawyers and a bankruptcy judge can, in short order, differentiate, separate and isolate the potential military uses so that one can ‘purify’ the sale.”

The Obama administration continues to stress the economic importance of winning the international competition for battery technology and manufacturing and is devoting further Energy Department money for that purpose. On Nov. 30, Energy Secretary Steven Chu awarded $120 million over five years to a multi-partner team led by Argonne National Laboratory to establish a new battery and energy storage “hub” of research.

“This is a partnership between world leading scientists and world leading companies, committed to ensuring that the advanced battery technologies the world needs will be invented and built right here in America,” Chu said.