Battery Maker A123 Systems Struggling in Wake of Fisker Karma Recall

After being forced to recall nearly $52 million worth of defective battery packs for the Fisker Karma, A123 Systems expects to lose money for the rest of this year. The Massachusetts-based battery manufacturer reported this week that it is headed for financial trouble due to heavy losses incurred by the recall.

A123 Systems was forced to recall the lithium-ion battery packs used in the Fisker Karma after several of the vehicles broke down -- including one high-profile example that had been delivered to Consumer Reports. In a filing with the Securities and Exchange Commission yesterday, A123 said the recall had cost $51.6 million to replace the affected battery packs, and it would cost an additional $15.2 million to replace defective batteries already produced at a facility in Michigan. "Therefore, the Company expects to continue to incur significant net losses and negative operating cash flows over the next several quarters," read the SEC filing.

Last week, A123 revealed that in the first quarter of 2012 it had a net loss of $125 million. The company thus says its revenue for all of 2012 will be far below projections, although claims that, "Our customer pipeline continues to be strong in all our target markets."A123 Systems has also suspended production at its Livonia, Michigan, facility due to the recall effort.

In 2009, A123 Systems received a $249 million grant from the U.S. Department of Energy to help develop U.S. manufacturing locations for electric and hybrid vehicle batteries. In September 2010, the company opened what was hailed as "the largest lithium ion automotive battery production facility in North America" in Livonia, Michigan.

General Motors has partnered with A123 Systems to provide batteries for future vehicles, including the Chevrolet Spark EV. The electric version of the subcompact Spark is scheduled to go on sale in early 2013. In an emailed statement, GM told us, "We are aware of the filing and we continue to work closely with A-123 Systems as we do with all of our suppliers.  Our plans for the Chevrolet Spark EV remain unchanged."

Chrysler had previously worked with A123 Systems to develop an electric version of the Fiat 500, but the partnership fell apart in August 2010.  The 500 EV still under development, but Chrysler is instead sourcing batteries from supplier SB LiMotive.

A123 also provides batteries and energy-storage systems for the power grid, military, and other commercial applications.

Sources: A123 Systems, Automotive News

btc909
Two lame companies destined to go under.

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