Battery maker may have to restructure as it runs out of cash

A123 Systems is a maker of lithium-ion batteries for electric cars. In March of 2012, A123 had to shell out $55 million in replacement costs when a recall was placed on the Fisker Karma due to defective battery packs.
By June of this year, A123 was talking up new lithium-ion battery technology optimized for performance in extreme temperatures. 
This week, the battery maker announced that it may run out of cash to fund operations and could be forced to seek bankruptcy protection. A123 has announced that it expects to be in default under its material debt agreements via a regulatory filing. The company expects to miss an interest payment due on $143.8 million worth of notes that expire in 2016. It also expected to miss a payment due yesterday on $2.76 million in outstanding 6% notes according to the regulatory filing.
“The company may not have sufficient cash to fund operations and may need to seek the protections provided under the U.S. Bankruptcy Code,” A123 said. “No assurance can be given that the company will be able to avoid restructuring, reorganization, or a bankruptcy filing.”
Bloomberg reports that after shouldering the costs of the $55 million Fisker recall, A123 was in need of financial assistance. The Detroit Free Press adds that the battery maker has lost over $857 million since it began operations. $208 million of that loss came just in the first half of 2012.
Since A123 Systems is expected to sell a majority stake to a Chinese owner, some Republican senators in Washington have been questioning whether the Energy Department should invest $120 million in stimulus funding into the battery maker. The senators believe that funding A123 when it plans to sell a majority to Chinese company would be using taxpayer money to fund foreign companies.

Sources: Bloomberg, Detroit Free Press

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