A123 Systems: 'No assurance' it can continue to operate
Massachusetts-based manufacturer A123 Systems issued a “going concern” warning in a filing with the U.S. Securities and Exchange Commission this week.
The lithium-ion battery maker said it expects “significant net losses and negative operating cash flows over the next several quarters.”
A123 Systems issued a "going concern" warning in filing with the SEC this week.
Photo courtesy of A123 Systems
The warning comes after the battery maker — which employs about 700 people at its battery plants in Romulus and Livonia and about 40 at its research and government solutions division in Ann Arbor — recalled defective batteries built at its Livonia plant. The company makes batteries for electric vehicle startup Fisker Automotive, BMW and General Motors.
A123 is replacing battery modules and packs that may contain defective prismatic cells produced at the facility. The cost: $51.6 million. It also recorded an inventory charge of $15.2 million related to existing inventory at the plant that may be defective.
A123 said in the filing it's looking to raise additional capital and is in discussions with strategic partners for investments in the company while it continues to seek to reduce cash used in operating and investing activities.
“Although the company’s intent is to improve its operating efficiencies and to obtain additional financing, 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,” the filing says.
In 2009, A123 landed government support via a $249.1 million economic stimulus grant from the U.S. Department of Energy — a grant Ann Arbor entrepreneur Maria Thompson was credited for playing an instrumental role in. Thompson retired as an A123 executive in 2010.
That came after the battery manufacturer won $125 million in tax credits and incentives from the Michigan Economic Development Corp in spring 2009 and a $10 million cash grant from the state in fall 2008.
Then the company took a series of blows after it temporarily laid off about 125 workers last fall after Fisker delayed a key product. In December, the company acknowledged a manufacturing error in the hose clamps in the internal cooling system of up to 50 battery packs.
General Motors acknowledged Wednesday’s filing and told Reuters in a statement: “We are aware of the filing and continue to work closely with A123 Systems as we do with all of our suppliers. Our plans for the Chevrolet Spark remain unchanged.”
For first quarter ended March 31, A123's total revenue dropped 40 percent to $10.9 million. Product revenue was $7.3 million, a 53 percent decrease from $15.5 million in the first quarter of 2011.
Shares of A123 (NASDAQ: AONE) are down Thursday after the news, falling 10.5 percent to $1.02 a share.
Lizzy Alfs is a business reporter for AnnArbor.com. Reach her at 734-623-2584 or email her at lizzyalfs@annarbor.com. Follow her on Twitter at http://twitter.com/lizzyalfs.
Comments
Epengar
Wed, Jun 6, 2012 : 6:19 p.m.
A123 just announced that they are hiring, up to 100 jobs per month for several months: http://www.detroitnews.com/article/20120606/AUTO01/206060319/1148/rss25
RES2
Mon, Jun 4, 2012 : 4:15 a.m.
Whats bad is I was one of the laid off workers, looks dim for ever getting my job back. Oh well it was fun while it lasted.
Jay Thomas
Fri, Jun 1, 2012 : 7:20 p.m.
Michigan's own Solyndra. Another bankrupt boondoggle. Anyone want to pass the collection plate?
clownfish
Fri, Jun 1, 2012 : 4:54 p.m.
There once was a time when people wanted a government that ran like a business. Now those same people are upset that the govt made a bet on businesses and may lose the investment, like most businesses do. For instance, Bain Capital did not have a 100% success rate, and they often used Other Peoples money, not that of the partners, to make those bets.
Goober
Fri, Jun 1, 2012 : 5:42 p.m.
So, what's your point?
Superior Twp voter
Fri, Jun 1, 2012 : 2:48 p.m.
$249 +++ million $$$ right down the rat-hole.....another Solyndra. Obama and team can sure pick the winners and losers.
Jeffersonian Liberal
Fri, Jun 1, 2012 : 12:33 p.m.
The government (Grandmole & the Marxist) picking winners (political contributors) and losers (the taxpayers).
Jim H
Fri, Jun 1, 2012 : 3:15 a.m.
Gee, if I could get someone to give me $249 million of taxpayer money, it wouldn't matter what I pretended to make. That giant sucking sound is from all the hands pulling the money from our pockets. I can do far more good with my money than our governments can. For a truly good story, find out how much went into whose pockets.
javajolt1
Fri, Jun 1, 2012 : 2:45 a.m.
This company got an absurd amount of press attention with unproven technology that was 'not ready for prime time'. Solyndra.
javajolt1
Fri, Jun 1, 2012 : 1:25 p.m.
one more thing about the 'Bain Capital" analogy.... At least private equity is comprised of individuals that definitely do their due diligence BEFORE placing their own money at risk. The government take money from the involuntary taxpayer and tries to 'pick winners' using variables like, lobbying, graft, influence, connections, privilege, etc. .....which is worse??
javajolt1
Fri, Jun 1, 2012 : 1:18 p.m.
Not sure what "private capital" has to do with it. Many if not most of these companies are government (as in taxpayer) funded. They go belly up and it's viewed as the cost of progress. The government is probably the worst at evaluating technology with potential. I don't think private equity bleeds capital from a venture or under funds R&D....if they are motivated by profit as you suggest, then if the technology has promise and a better than even chance of making money, private equity will fund R & D to make a better return....that's the way it works. Government drops our money into these ventures with far less due diligence.
Basic Bob
Fri, Jun 1, 2012 : 10:06 a.m.
Agreed, that's why defective products and recalls are not a big surprise. Producing batteries with enough power to drive a car down the road is not a trivial matter. With private equity firms like Bain Capital pulling every available dollar of capitalization out of otherwise profitable companies, basic research and government investment is required to advance the technology. Private companies no longer have the cash to do real development and must rely on loans to fund normal business activities. A single failure will bankrupt a company.
braggslaw
Fri, Jun 1, 2012 : 2:21 a.m.
anybody who knew anything about battery production and chemistry knew they were destined to fail along with Tesla, Fisker, etc. No economies of scale, living off federal grants, the large OEMS's did not believe in their abilities etc. Another waste of money by he federal govt. "clean energy" intellectuals (i.e. harvard philosophy graduates working for the federal govt.)
leaguebus
Fri, Jun 1, 2012 : 1:47 a.m.
We gave outrageous profits to Cheneys Halliburton for 8 years while they scandalously stole millions with war contracts. Complaining about these energy grants is the pot calling the kettle black.the difference is that there was nothing illegal done by these companies, unlike Halliburton. http://money.cnn.com/magazines/fortune/fortune_archive/2005/04/18/8257012/index.htm
Arborcomment
Fri, Jun 1, 2012 : 11:06 p.m.
Always get a chuckle when the "yeah-but" attempted rebuttal is used. You've had almost three years for AG Holder to dig something up worth prosecuting on Haliburton, and two years of Waxman as chairman of a house committee to do the same - nothing. And the investigation on crony capitalism will continue: 71% of "green jobs" grants and loans went to Obama campaign contributors.
The Black Stallion3
Fri, Jun 1, 2012 : 1:09 a.m.
Do we really want 4 more years of giving our hard earned tax dollars to failed business and family vacations? I sure hope not
snoopdog
Thu, May 31, 2012 : 11:23 p.m.
Maybe Al Gore could give them a big fat donation off the millions he has made scamming and scaring people over supposed global warming , climate change or whatever they call it ! Good Day
leaguebus
Fri, Jun 1, 2012 : 1:31 a.m.
Any proof that your statements on Global Warming are true? It's nice to comment but it's nicer to be truthful in your comments.
Arborcomment
Thu, May 31, 2012 : 11:09 p.m.
Fisker automotive is circling the bowl right now as well. So, even if battery quality control issues are fixed, to whom are they going to sell them to? Oh, and Fisker also received a federal grant or loan guarantee to re-hab a former GM plant to build their vehicles - in Delaware - Biden cut the ribbon.
braggslaw
Fri, Jun 1, 2012 : 2:22 a.m.
The Fisker Karma vehicle is the biggest white elephant ever produced. A 6000 lb performance car? really? 10 miles to the gallon when operating in series hybrid mode... really? It is a joke.
Hot Sam
Fri, Jun 1, 2012 : 2:09 a.m.
Unless they get more monet from us, they will continue to be produced in Finland... Due to its outsourcing model, the company claims that it can make a profit from selling just 15,000 cars.[1] In 2008 Fisker estimated 15,000 cars per year will be assembled by Valmet Automotive in Uusikaupunki, Finland.[25] On October 27, 2009, Fisker officials announced that the company had signed a letter of intent to take control of the Boxwood Road Plant (previously owned and operated by General Motors) in Wilmington, Delaware:[26] Production is scheduled to begin in late 2012. Fisker Automotive anticipates Project NINA will ultimately create or support 2,000 factory jobs and more than 3,000 vendor and supplier jobs by 2014, as production ramps up to full capacity of 75,000-100,000 vehicles per year. More than half will be exported, the largest percentage of any domestic manufacturer. Vice President Joe Biden attended the announcement.[26] In addition to a purchase price of $20 million, Fisker expects to invest $175 million re-tooling the plant.[27] The Government of Delaware provided $21 million in funding for the plant.[28] Fisker later suspended development of the Wilmington plant as a result of a freeze on its federal loan and suggested that production might shift elsewhere unless its funding is restored.[28][29]
Goober
Thu, May 31, 2012 : 10:55 p.m.
I don't understand. U.S. Energy Secretary Steven Chu, as well as U.S. Senators Debbie Stabenow and Carl Levin from Michigan., as well as President Obama backed them with $249 million in hard earned funds to get them started. I also undetand that this was a grant, meaning, a freebie. Maybe others can confirm whether this was a loan or grant. My understanding, a grant - no payback needed, desired or required. So - what's the problem? Why the devasting losses? What do the A123 Systems leaders have to say about their ability to lead the business? Will they pay bonuses regardless of the financial picture? Lot's to say, report and conclude from this example of a poor business model. I guess, O'Bama and his team, believe it is the right thing to do with our 'hard earned' money. My opinion - more money down the poop tube. What a shame!
Ron Granger
Thu, May 31, 2012 : 10:48 p.m.
Where did the hundreds of millions go? Apparently not on basic product quality checks. The recall problem seems to stem from a simple quality issue that should have been caught in routine sampling of production units. How about some reporting on where the money went?
G. Orwell
Thu, May 31, 2012 : 10:47 p.m.
Bain Capital gave twice as much money to Obama as they gave to Romney. Just proves there is no difference between Dems and Repubs. They are all bought and paid for.
Elijah Shalis
Fri, Jun 1, 2012 : 1:27 p.m.
Bain probably did that on purpose to undercut the President.
Soothslayer
Thu, May 31, 2012 : 10:29 p.m.
Land a grant & cash out before the battery acid hits the fan. Just look at all the hot air in this former post "thousands of jobs!" "a blockbuster".. yeah blockbuster all right. http://www.annarbor.com/business-review/ann-arbor-entrepreneur-maria-thompson-retires-from-battery-firm-a123systems/
Amy Tran
Thu, May 31, 2012 : 10:09 p.m.
People who worked in the battery community for years laughed at the stupid investors and Obama Administration for putting money in this junk! If you lose all your money, you deserve it!
xmo
Thu, May 31, 2012 : 10 p.m.
Where is "Bain Capital Partners LLC, a private investment firm headquartered in Boston" when you need them?