A123 Systems fixes battery problem

Article by Christian Andrei, on May 17, 2012

Within the next several quarters, A123 Systems’ production capacity of lithium-ion batteries will be constrained as it continues to recover from a recall of defective battery packs -- a major factor in its record quarterly loss. A123 Systems said that it has recognized and rectified the root cause of the faulty batteries and was shipping replacement products customers who are affected.

In a statement, A123 CEO David Vieau said the company aims to provide replacement products “as quickly as possible." He said that the company’s customer pipeline stayed strong. Just last week, A123 cautioned that there would be a massive first-quarter loss because of the recall.

It also said that a lot of the production that would have raised revenue this year will be diverted to replace the potentially defective cells. The company said that recalling the battery packs would cost $66.8 million. The Obama administration had granted $249 million to A123 as part of a program to develop advanced batteries. A123 was a start-up at the Massachusetts Institute of Technology. It has announced that it is now resuming production at its suburban Detroit plant but this will be regulated.

Its first-quarter net loss grew to $125 million, or 87 cents per share, from the past year’s figure of $53.6 million, or 51 cents per share. Its revenue declined by 40% to $10.9 million. The previous biggest loss of the company had been $85 million in the fourth quarter of 2011, when it posted a revenue of $40.4 million. After having just reduced it last week, 123 reiterated its outlook for the full year. It now believes that its 2012 revenue would have a range of $145 million to $175 million, a drop from its previous forecast of $230 million to $300 million.

Topics: a123

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