Is electric-vehicle battery maker A123 Systems running out of juice?

The Massachusetts-based lithium-ion battery maker said in a May 30 filing with the U.S. Securities and Exchange Commission that it expressed "doubt" over being able to continue after recent hiccups that included a loan restructuring and product recall.

A123, whose customers include General Motors and Fisker, said its line of credit from its lead bank was eliminated earlier that month and replaced by $15 million worth of letters of credit. In late March, A123 took a $51.6 million charge because of the need to replace cells made at its Michigan plant that ended up in some Fisker Karmas.

"These matters along with the Company's historical net losses and negative operating cash flows raise substantial doubt about the Company's ability to continue as a going concern," A123 said in the filing.

In May, A123 said its first-quarter loss more than doubled to $125 million from a $53.6 million loss a year earlier – primarily because of the recall and the need to replenish inventory – while revenue fell 40 percent to $10.9 million.

A123 was founded in 2001 as a Massachusetts Institute of Technology spin-off and went public in September 2009. This year, the company, which has received U.S. Department of Energy funding, won battery-making contracts with BMW, Tata and Via.


I'm reporting this comment as:

Reported comments and users are reviewed by Autoblog staff 24 hours a day, seven days a week to determine whether they violate Community Guideline. Accounts are penalized for Community Guidelines violations and serious or repeated violations can lead to account termination.


    • 1 Second Ago
  • 42 Comments
      HVH20
      • 3 Years Ago
      A123 is just going to go through bankruptcy then emerge debt free, just like Ener1 did. Its much easier to become profitable if you don't have to pay your debts back. Worked for GM and several other companies, unfortunately it seems to be par for the course in business these days. Doesn't make it right.
        EZEE
        • 3 Years Ago
        @HVH20
        Mmmmmmmmmmmm, I haven't studies it, so difficult to say. Marco would be far more qualified, but one must have a realistic shot and assets to do that type of bankruptcy. If the company is sound and has assets, you can do that, but depending on the shape they are in, it could go straight to liquidation. This is the argument on gm and Chrysler. The president says it would have been liquidation, Romney says the orderly bankruptcy.
      marcopolo
      • 3 Years Ago
      I hope A 123 can restructure and survive. It's sad to see American technology, especially US technology developed at taxpayer expense, being continually transfered to Asia.
      PR
      • 3 Years Ago
      The defective battery problem is a one-time cost. They found the exact source of the problem, and fixed it. It is not going to be a re-accruing cost. That's not going to kill A123. However, the 40% drop in revenue is a big problem. This is what needs to be turned around, or they will be the next company to hire Tom LaSorda to do what he is best known for doing.
        Dan Frederiksen
        • 3 Years Ago
        @PR
        I think it's the quarter billion dollar annual loss that makes the difference. unlimited revenue is easy if you are willing to operate at a loss
      goodoldgorr
      • 3 Years Ago
      I wonder if the volt will survive to this without a jump in price.
        Spec
        • 3 Years Ago
        @goodoldgorr
        The Volt does not use A123 batteries. (At least not yet.)
      Spec
      • 3 Years Ago
      The phrase is "going concern" not "growing concern". All you had to do was cut & paste! Jeez. (And it is a very famous phrase in accounting.) Oh man, I hope A123 can get through this. Raising the "going concern" flag means you believe there is a good chance you'll go under. :-(
      • 3 Years Ago
      Everybody and their mom has bashed the green sector for being a waste of tax dollars. It was a good initiative until some political figures in power didn't agree and sought to bash it, thus creating the band wagon effect of leading their mindless followers who cannot think outside the box to look at it as just a waste of tax dollars. What else would you have done? Instead of all this blaming, people...no, our elected leaders need to find ways to fix it or make it better - thats their job, not to just bitch, complain, and point fingers. This is all just an excercise of political masturbation.
      EZEE
      • 3 Years Ago
      Dag Gum It!
      2 Wheeled Menace
      • 3 Years Ago
      *wipes froth from mouth* i'm.. i'm not even gonna say how pissed off this makes me.
      Dan Frederiksen
      • 3 Years Ago
      the 50 million dollar recall was insignificant. they were losing a quarter of a billion per year anyway. as I recall I have told you that this day was coming a couple of times. as fantastically unintelligent as their decision to not sell their product was, there would have to be many other equally poor decisions to account for such spectacular losses. I'm not well versed enough in public company dynamics to say what will happen next but I hope their otherwise excellent product will survive. the death of A123 makes Fisker's woes almost comically difficult. incidentally Tesla has produced losses as great as A123. by the Q4 report we will know if their bean counting kung fu is stronger than A123's. I'm certainly not buying stock at the moment but one could hope. if Tesla falls too it will have been somewhat of a clean sweep. but it's their own fault for not listening to me : )
      Spec
      • 3 Years Ago
      A123 just never got good design wins. -They lost the Volt to LG Chem -They had a deal with Chrysler but then Chrysler ditch the whole ENVI project -They got a deal with Fisker but Fisker is very small, late, controversial -To get the Fisker deal, they invested in Fisker . . . yeah that doesn't work. Ask Enerdel. -Volvo doesn't seem to be going anywhere. -Spark comes out in 2013 but many say it is just a compliance car and thus won't sell many. They were all dressed up but nowhere to go.
        2 Wheeled Menace
        • 3 Years Ago
        @Spec
        And also refused to sell to anyone else other than super, super big guys, while siphoning our tax dollars. Hey man, i'm all for the American dream, but when i prop up your company with my hard earned cash, i think that seeing a benefit from it ( like for example, A123 actually selling their product to me, and gasp, maybe even making things here in America ) is not an unreasonable expectation. They can seriously go boink themselves.
          EZEE
          • 3 Years Ago
          @2 Wheeled Menace
          hmmmm. That is actually kinda dumb. The money is green regardless of where it comes from, and, get some publicity if some little outfit takes off. Or even some wacky dude attaches one to his bike... :)
          marcopolo
          • 3 Years Ago
          @2 Wheeled Menace
          @Ezee, Outside of Asia, very few battery manufacturers can afford to carry the sort of insurance, overhead and inventory needed to set up a virtual retail division. In addition, their existing large clients may complain at competition from 'backyard' repairers. Counterfeiting is another problem. The increase in overhead and inconvenience is considerable for little gain and a lot of wingeing!
      • 3 Years Ago
      Just to clarify, I believe Chevy was planning on using A123 to supply batteries for the Spark. However, the batteries for the Volt are made by LG Chem, a more proven and solid company in my opinion. Of course, Volt battery prices could still increase if A123 trouble results in significantly higher demand on LG Chem from previous A123 customers.
      Dave
      • 3 Years Ago
      Most probably A123 will go bankrupt, its intellectual property will be sold and it will become the subject of various conspiracy theories.
        Spec
        • 3 Years Ago
        @Dave
        LOL. So true. BTW, those conspiracy theories on the NiMH batteries are bogus. You can't block technology using patents in such a manner or else you are subject to an antitrust lawsuit that could reap treble damages. If there was any truth to that conspiracy theory, lawyers would have been all over it.
          Letstakeawalk
          • 3 Years Ago
          @Spec
          I've often pointed out that the NiMH issue wasn't a conspiracy by Chevron. Just business (although not always *good* business - re: the lawsuits for not delivering product). Others were free to develop their own batteries, and did - not to mention that it spurred on the development of Li-ion as an alternative.
          Letstakeawalk
          • 3 Years Ago
          @Spec
          http://en.wikipedia.org/wiki/Patent_encumbrance_of_large_automotive_NiMH_batteries
          Joeviocoe
          • 3 Years Ago
          @Spec
          Would you think that the Chinese would have honored NiMH patents for almost 20 years??
          JakeY
          • 3 Years Ago
          @Spec
          @Spec Wasn't the main issue with the Nimh patents the provision that limited their use to smaller packs? From the wiki that was true, so it's not a conspiracy theory, but actual fact. And in terms of China, there was barely a market for cars back then in China, much less EVs (and when cars came out they were much cheaper than here). And any Chinese manufacturer can't sell the batteries here because of the patent (see what happened to Panasonic). Nimh wasn't a holy grail, but it would have allowed Toyota to keep making RAV4-EVs, so perhaps the CARB program wouldn't have had to die out (the only real alternative ready back then was lead acid, which sucked). There's no "antitrust lawsuit" for patents. Patents can give you exclusive usage of a technology with no antitrust issue (see the smart phone patent battles and the resulting injunctions the barred devices from sale). There's something called FRAND patents (fair, reasonable, and non-discriminatory) , but they only apply to patents covering standards.
          Dan Frederiksen
          • 3 Years Ago
          @Spec
          oil is just business too. and that's the problem
          Spec
          • 3 Years Ago
          @Spec
          LTAW . . . anything in particular in that wiki that bothers you? Perhaps Cobasys' reluctance to manufacture unless they got a 10K order . . . well we see that all the time even with companies like A123. And if you don't like that policy, you could always manufacture your own and then just pay A123 a reasonable royalty. If they didn't like that solution, then file an anti-trust suit against them. No conspiracy, just business. People are often attracted to conspiracy theories because they are interesting or they want things to be different. But that doesn't make them true.
          Spec
          • 3 Years Ago
          @Spec
          @Joeviocoe Exactly. Patents only apply to individual countries. If the NiMH batteries were really some miracle like the mythical 100MPG carburetor then they would have been used in other countries. It is just really hard to come up with a good cheap battery that can compete with cheap ICE & gasoline. But we are just about there.
        PR
        • 3 Years Ago
        @Dave
        Dave, As long as A123 has viable contracts, they are more likely to be sold than to be liquidated in bankruptcy. They also have a good case for re-organization through bankruptcy, given the very large one-time charge due to the manufacturing defect they discovered. If they have to go the direction of bankruptcy, a large one-time charges make A123 a much better candidate for reorganization than for being liquidated.
          brotherkenny4
          • 3 Years Ago
          @PR
          I agree, the company is in the midst of bringing factories on line (big capital expenditures). How could they not be operating in the red. The contracts are starting to add up for them, but those are still months and years off. They have this one time charge that looks bad and is bad, but hopefully they learn from it. The question is still the question that it always was, and that is do they have a future? No one who invested in them thought they were going to make money now. The loss of the lead banks support is the most disconcerting thing. Although, not suprising, VC money in this country is pretty weak. MBAs with no vision, mostly attracted to the most pompous individual in the room rather than the most adept. Incapable of determining skill in others, and as embarassed as a cat falling off a foot stool regarding mistakes. Real products of our educational system (Fox NEWS).
          PR
          • 3 Years Ago
          @PR
          And by sold, I don't mean selling off the assets and closing the doors. I mean being sold to another company as a whole and kept in operation.
        Pandabear
        • 3 Years Ago
        @Dave
        yup, most likely the Japanese (likely Panasonic) or Chinese would buy them.
    • Load More Comments