Ad Radar

Pushing Up Daisies? Battery Supplier A123 Looking at Massive Losses for Foreseeable Future

By Jacob Brown | May 31, 2012
Battery supplier A123 Systems has announced there's "substantial doubt" over its long-term viability, as it has reported mounting losses throughout the first half of 2012. And it doesn't expect those losses to subside over the next few quarters. In fact, A123 announced in a recent Security and Exchange Commission filing that, "There is no assurance that the company will be able to obtain such financing on favorable terms, if at all, or to successfully further reduce costs in such a way that would continue to allow the company to operate its business." If you're a conservative seeking nomination for a political office, A123's announcement couldn't have come at a better time. Yay, let's cheer on companies going under and people losing their jobs so we can prove a point for an election cycle! But if you actually have a vested interest in A123—such is the case with Fisker Automotive, GM, BMW, and the company's employees—you might not be as cheerful. Earlier this year, A123 lost $67 million on repairs alone for fixing defective 2012 Fisker Karma sedans (shown) with batteries made in its Detroit plant. The recall came about after Consumer Reports said its longterm Karma "bricked," or stopped working. Somewhat ironically, A123's batteries made in China didn't face the same quality defects. A123 dropped a massive investment into Fisker after receiving its own $249 million Department of Energy loan in 2010. It was granted to the battery startup after the Obama Administration stated it wanted 1 million electric cars on the road by 2015. Earlier this year, Fisker said it was reducing production on the Karma and delaying production on the upcoming Fisker Atlantic midsize sedan until 2014, as it's busy securing funds to secure a semblance of longterm viability. A123 has contracts to supply batteries for the 2013 Chevrolet Spark EV and BMW ActiveHybrid 3 and 5 Series sedans, which may be troublesome if the battery maker were to face further hardships. In a statement, GM said, "We are aware of the filing and we continue to work closely with A123 Systems as we do with all of our suppliers. Our plans for the Chevrolet Spark remain unchanged." A123 says it plans to bleed through cash for some time, posting a $125 million first-quarter loss earlier this year, its biggest ever. Now comes the question of whether A123 can weather the storm until it's able to make electric vehicle batteries more profitably or if it'll become the next Solyndra. Source: Automotive News (Subscription required)
 
0 comments
close