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Print 16 comment(s) - last by Samus.. on Oct 17 at 1:48 AM

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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Another blow
By Dr of crap on 10/16/2012 9:34:09 AM , Rating: 4
"...questioning whether the Energy Department should invest $120 million in stimulus funding into the battery maker"

Didn't or doesn't this company make the Volt batteries as well??

I think we should give them a sh$t ton of money. They obviously have a product in high demand! This business HAS to succeed!

/end sarcasm

In reality the MARKET determines if a business stays afloat. Sorry but what you offer isn't in demand, see you later!




RE: Another blow
By othercents on 10/16/2012 10:40:46 AM , Rating: 2
quote:
GM announced last August a $43-million investment to prepare the 160,000-square-foot, landfill-free facility for production of lithium-ion battery packs for the Volt and other electric vehicles with extended-range capabilities. The plant is part of a wholly-owned subsidiary of General Motors called GM Subsystems Manufacturing LLC.


GM creates their own batteries for the Volt. I believe the investment of federal money into A123 Systems was the belief that they would get the GM contract for batteries. It is actually good that GM created their own since A123 System had that recall.

Other


RE: Another blow
By d4a2n0k on 10/16/2012 12:20:46 PM , Rating: 2
LG is the battery maker for the Volt.


RE: Another blow
By FITCamaro on 10/16/2012 12:30:19 PM , Rating: 2
Our tax dollars at work


RE: Another blow
By Samus on 10/17/2012 1:48:02 AM , Rating: 1
It's just as important to invest in battery technology as it is to invest in space exploration. In the end its fractions of a percentage of the federal budget. Cutting funding from these programs isn't going to fix our spending problem.

We need to cut military (because they can't spend money efficiently, so like we did to NASA in the 70's, we cut their funding and FORCE them to spend money efficiently.)

We need to fix social services, including healthcare. Nobody seems to have a clear vision on this. Romney and Obama have hugely flawed ideas about how to reform healthcare. We need to fix social security, not get rid of it. It's one of the few government programs that works and can be fixed to keep working.

We need to fix the post office, for obvious reasons. How are we not making money providing a service everyone depends on? If you're not making money on a service, eliminate that service. Bulk mail? ELIMINATE IT. I'm tired of junk mail!

We need to fix education; see military. Selectively reduce their budget and force them to spend money efficiently.

We need to fix the way we tax imported goods. This is the only way we'll get China to cooperate and stop devaluing their currency. This is also the simple solution to bringing manufacturing back to the United States. We should have had tarrif reform 30 years ago when the Japanese started shipping over then-superior cars and motorcycles.

We need to fix the USPTO. It's FUBAR operations are holding back innovation and destroying competition.

Lastly, we need to UNDO what Clinton did in the 90's that effectively created the 2008 economic crisis and re-seperate banks and mortgage companies. Amazingly, Bush tried to do this 3 times and failed because there could not be a bipartisan solution. These financial institutions being married is a great conflict of interest to borrowers. There is no way to regulate them. Break them up like AT&T baby.

Vote Samus 2016


Glad I pulled out...
By Ytsejamer1 on 10/16/2012 1:17:31 PM , Rating: 3
When they went public...I bought in. After a day, I came to my senses and sold the few shares I had previously purchased. I lost $20.

I'm not going to lay all EV/Battery/Tech failures at the President's feet. Honestly...it's a little lazy of an argument and somewhat shortsighted.

If we weren't funding NASA to the extraordinary levels we were doing in the 60s...those MIT kids, contractors, and who knows who else wouldn't have invented something called software and/or gave birth to an entire industry that many of us make our livings on.

I hate to see investments in new ideas fail like anyone else...but I'd rather be moving forward, trying new things, etc. At $120m or whatever it is...it's a drop in the bucket really. I like that investing in new tech rather than perhaps a war or two for $120m an hour. *broad generalization to make my point about scope of investment*




RE: Glad I pulled out...
By Mint on 10/16/2012 2:31:51 PM , Rating: 1
A123 has some really good technology. I hope it doesn't just go to China because we're too miserly about timely payment on a $120M loan. Battery technology is going to eventually displace $300B/yr in oil imports. Over 10 years, eating that loss would be a factor of 1/25,000.

Waving the white flag and letting China get all the battery manufacturing for this kind of penny pinching is nonsense.


RE: Glad I pulled out...
By Ringold on 10/16/2012 3:21:41 PM , Rating: 1
I like your update below, but it's not being "miserly" to have concern over a debt payment. It's contract law, and respect of contract law is what primarily separates us from banana republics like Argentina, Venezeula, much of Africa, etc. We've got so many other problems, the last thing we want to do is make companies and investors wonder how much we respect the rule of law here any more then they already do (Chinese wind farm, UAW bailouts while senior bondholders in automakers were annihilated, etc).


RE: Glad I pulled out...
By Mint on 10/16/2012 4:07:54 PM , Rating: 2
True. I wasn't saying they should get away with it, but there should be some negotiation and flexibility, IMO, with emerging technologies to get the most out of them. I think it would be sad if the company's assets/IP just moved to China because it was the easiest way to repay the loan.

It seems to have played out pretty well. Seems like there will be a decent synergy with JCI. A123 has tested some cells lasting 100,000 cycles, and if they have the means to take on some risk by leasing their batteries, then they can get more revenue per kWh.


RE: Glad I pulled out...
By Mint on 10/16/2012 2:39:22 PM , Rating: 2
UPDATE:

http://www.bloomberg.com/news/2012-10-16/electric-...

quote:
Johnson Controls plans to acquire A123’s automotive business assets in a deal valued at $125 million and will provide financing of $72.5 million to support A123’s continued operations, according to the release. A deal to sell a majority stake to a Chinese company fell through, A123 said.


Interesting
By mchentz on 10/16/2012 9:57:47 AM , Rating: 2
That last paragraph of the article is what I find interesting.

This is what happens when you are to early with new technologies (Electric Cars). The government appears to be artificially propping up this industry because consumer demand is not there.




RE: Interesting
By Dr of crap on 10/16/2012 12:00:26 PM , Rating: 2
So your saying the govt SHOULD prop up these guys?
Why? The market is saying we don't want it, YET the govt wants the tech to be in the forefront of altrenative vehicles.

MAYBE being paid off handsomely to push EVs on the masses?


RE: Interesting
By freedom4556 on 10/16/2012 6:33:00 PM , Rating: 2
quote:
So your saying the govt SHOULD prop up these guys?


Can you read? That's not at all what he said.


Lets not Forget
By bull2760 on 10/16/2012 12:58:47 PM , Rating: 2
The GM has a 20 year tax credit thanks to Obama. So while we all were paying taxes last year GM was handing out bonuses to employees with some being as high as 50% of their pay. To make matters worse GM actually received 110 million from the Government for tax credits due to Volt sales. So in reality GM had a negative tax rate of 1.5%. Thank you Mr Obama for rescuing this piece of shit company and making my kids, kids pay the dept back.




RE: Lets not Forget
By Mint on 10/16/2012 3:08:07 PM , Rating: 2
Maybe you should read up on the source material a bit before parroting Republican talking points.

GM paid no taxes because they lost $18B in years before the restructuring. There's no net profit from that time, so they shouldn't be paying taxes. Getting a measly $110M now just means they won't be reducing taxes by that much in the future after that carryover loss is erased.

I may be liberal on most issues, but I have no qualms with companies paying no taxes if they have no profits, i.e. if their income is reinvested in new hires, new equipment, paying interest, offsetting losses, etc. That how the tax code does and should work, and it's been this way for ages.


Tesla
By titanmiller on 10/16/2012 1:24:12 PM , Rating: 2
Isn't A123 the battery cell provider for Tesla? If so, I wonder how this could affect the future of that company?




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