Earlier this week, A123 Systems — the exclusive battery supplier to the upcoming electric variant of the Chevrolet Spark — has expressed “substantial doubt” about its viability as a “going concern” due to the firm’s expectations of burning through cash and steep losses over the next several quarters.
In 2009, the company received $249 million from the Obama administration as part of a program to stimulate battery development. That year, A123 also went public (NASDAQ ticker symbol AONE).
But losses stemming from the company’s recall of defective batteries used in the Fisker Karma plug-in hybrid have put a strain on the business; the company’s recall is expected to cost the company approximately $67 million while pressing it to rebuild its entire inventory. The defect in its battery was found earlier this year when a Karma failed while in the hands of Consumer Reports magazine.
A123, which is now looking to raise additional funds and explore “other strategic alliances” has contracts with GM (Spark), BMW (3- and 5-Series hybrids), and Fisker (Karma).
Additionally, an A123 battery was at the root of the explosion at GM’s Warren Tech Center in April, although the unit was exposed to severe testing procedures.
The GM Authority Take
Some analysts question whether A123 will be able to effectively meet its contractual supply obligations to General Motors in providing the automaker with batteries for the Spark electric. Meanwhile, others wonder whether General Motors will instead simply buy the struggling battery maker outright — thereby creating an in-house battery division.
As of this writing, A123 has a market capitalization of $139.65 million, which likely seems like pocket change for GM. A123’s stock finished May down $0.27, or 22.13 percent, to 0.950 per share.
Comments
What about just use the ones from LG?
What about Envia? How long until those are ready for prime time? If GM was going to buy a battery company to make them in house, it looks like this one would be cheaper and more advanced than A123 Systems, no?
http://gmauthority.com/blog/2012/03/start-up-company-envia-systems-develops-cheaper-better-batteries/
I thought GM had a in-house battery division? Where does GM get the battery for the Volt?
Volt batteries are sourced from LG Chem. GM has a battery integration division, where they determine the requirements and specifications for each electric/hybrid vehicle’s electrical system and then apply and test the powertrain, but they don’t actually engineer or manufacture the units themselves.
I think this will change soon, or as soon as EVs start being more prominent; the increased flexibility and control, with the long-term decrease in per-unit cost that an in-house battery unit brings will push automakers to create them. Could you imagine GM sourcing engines from a supplier?
Yes and no, while I think GM will(and should) build batteries in house, it is not implausible that GM will continue to source batteries for a long time yet, as recently as 2000s, automakers have sourced many integral components in their cars, GM has done transmissions and isnt one of the heavy duty truck engine sources, Ford, a prominent 4wd manufacturer sourced the 4wd system for the Escape.
On that note, I think GM should slowly try to make everything in their cars by themselves, this will probably take many years, if not decades, to accomplish, but the long terms benefits are immense.
One wonders what advantage would be gained from purchasing A123 outright…
A123’s claim to fame is it’s LifePo ( lithium iron phosphate ) battery – which was hailed at it’s invention as superior to lithium polymer or lithium ion for it’s superior thermal qualities. LiPo and Li Ion batteries are susceptible to heat buildup ( ie: Dell laptop battery fires ). Manufacturers who were planning plug-in hybrids were all looking towards Li Ion until fears developed regarding volatility and safety.
A123 batteries could first be found in DeWalt power tools – and were made in USA. A123 then began it’s manufacturing in China.
There is a huge question as to whether LifePo batteries are an inherently flawed chemistry. One could chalk it up to the Chinese manufacture but for the recent incident at GM. U.S. scooter maker, Go-Ped in Nevada sold electric scooters with Li Ion battery packs, but sales were slow due to the incredible cost of the battery packs ( sound familiiar? ) so they eventually offered an A123 LifePo variant which brought costs down and did offer a lower operating temp. battery pack. Go-Ped silently removed the LifePo models from their line with no explanation a year ago. My feeling is that the lithium iron phosphate chemistry is intrinsically flawed or at the least, not ready for prime time. Besides it’s superior heat qualities, LiFePo packs generally are less energy dense than the Li Ion ( LG Chem ) or LiPo packs – so why should GM buy the company with all those negative issues to overcome?
In the early stages of Volt development GM narrowed their battery sourcing to 2 suppliers. They tested LG Chem’s battery against A123’s and wound up with LG Chem, who agreed to build a Michigan battery plant in three years. I was pulling for A123 as an American company, but when they started building their packs in China, I started to drink less of their Kool-Aid. Today I have serious doubts about their patented chemistry altogether.With Fisker’s battery failures I think GM needs to totally re-think the sourcing of their Spark EV and hybrid batteries moving forward.
First, A123 nanophosphate is the best lithium ion battery you can get in terms of power density – up to 35 C-rate continuous and 100 C-rate pulse. http://goo.gl/lLc8t It is the one that can give enough power to drive an EV in pure electric mode (eg Fisker Karma). With Volt, ICE kicks in to help the LG Chem battery. This is why GM has picked A123 for the Spark. They did not pick A123 for the Volt because the prismatic plant was not ready and did not exist.
$249M government grant is earmarked for building a prismatic plant capacity in US at 50/50 cost share basis. The technology was transferred from Asia to US. So far, only $129M of the grant has been used. Media misreported the whole $249M grant went down the drain. What has been lost by the A123 is shareholders’ money! There is no expiry date on the A123 plant. Government’s $129M grant is still there, in the plant.
A123 had to issue going concern statement as a boiler plate requirement for the SEC filing. At the same time, the company projection is still for positive EBITDA for 2013. What does that mean? It means, production pipeline is good, A123 just needs short term financing. When there are purchase orders, there is no problem with financing.
What is the production pipeline?
In the transportation segment, there are,
Fisker Karma and the future Atlantic
BMW ActiveHybrid series 3, series 5 and series 7
GM Spark
SAIC Roewe EV
Geely EV
The bus and truck segment, there are,
BAE
ViaMotor
Alte
Smith Electric
Damiler
Tata
The grid segment, there are
AES
Sempra
Maui Electric
The Commercial segment
The military segment.
Why is A123 in such a big spot?
The problem is not the product. It is the management’s mismanagement and misexecution. A123 has expanded too aggressively and too fast. Ran into manufacturing problems and painted themselves into a corner by running low in fund.
To illustrate the safety of A123 battery. Last time in the Texas Karma fire (reason still unknown), the entire car was reduced to ashes, A123 battery was intact and still functional after the fire.
The GM lab explosion is not related to the safety of the A123 battery. It was an extreme abuse test, unfortunately, personnel was under precaution.
I would suggest GM not to buy A123, but instead invest in A123 in return to lock down a % of production capacity in the future.
Are you from A123?
No, I am an A123 shareholder.
http://goo.gl/25CJa
Oh, well I wouldn’t put a “buy” rating on it unless your in it for the long haul.
Are you a major shareholder? Do they disclose financial information to you?
Because you sound pretty confident of its success
One of the reasons I like advanced battery is it is an enabler for the coming Third Industrial Revolution.
To Jeremy Rifkin, battery energy storage and hydrogen fuel cell are two enablers for the Third Industrial Revolution.
Effectively, decentralizing energy production by using renewable energy in every roof top and “Energy Internet” (smart grid) will transform our society, free up exorbitant energy bill and create a new local economy.
Essentially, he combined two separate ideas together: Renewable Energy and Internet.
http://goo.gl/2pPd3
Financial information are on the SEC filings. Anyone can have access to them.
I am not suggesting to anyone to buy A123 at any point. One has to do their own due diligent and to figure out the probability of the Going Concern statement. So far A123 has gotten $50M financing.
I am just trying to provide some clarity to all the misinformation in the media especially for the $249M government grant. They all tried to say A123 has obtained the entire $249M and blew it all. In actual fact, only $129M was used to pay for half of the prismatic plant in Livonia and Romulus.
I am interested in facts and hence my Facebook page. I am sick and tired of Yahoo message board spreading FUDs and inaccurate information day in and day out. Try to make a little voice, that’s all.
Thanks for the indepth info, Sparky. I have a bit of new information to check out. It is much appreciated.
so if the spark ev is going to be a good seller in usa. in a year or two. would it be a good investment to buy some A123 stock, since its like 26 cents right now and it use to be 26 dollars?
On Friday it closed at $0.195