A123 Systems Inc. is planning to open 400 new jobs at two of its plants in suburban Detroit by November even with rising financial troubles and an automotive battery recall that costs almost $67 million. According to Jason Forcier, the vice president of A123's automotive solutions group, it will hire 100 workers for every month for the upcoming four months for its plants in Livonia and Romulus for its power-grid and commercial transportation businesses. When A123 was at its peak in 2011, it had 1,020 employees in Southeast Michigan. Its workforce has now dropped to 781 employees. A123, the Waltham, Mass.-based lithium battery maker, announced the recall last March after finding that its automated welding machine in Livonia was wrong calibrated.
This defect was detected during a test by Consumer Reports when the battery of a Fisker Karma plug-in hybrid had failed. It was found out later that five automotive customers received batteries that have potentially defective cells. During a conference call last month, CEO David Vieau told analysts that A123 will complete shipments of replacement batteries during the next several quarters. It’s expected that A123 will spend $66.8 million to replace the defective batteries. In the last quarter that ended March 31, A123 recorded a $125 million loss. To remedy this, A123 was able to raise $50 million in senior unsecured convertible notes and warrants from institutional buyers.
The company’s filing with the U.S. Securities and Exchange Commission indicated that without added funding, there’s “substantial doubt” on whether the company will be able to continue. However, Forcier is confident that the company’s power-grid and commercial transportation businesses would more than offset the problems with electric-vehicle batteries. He said that the EV business experienced “some pullback” and was further aggravated by the funding problem. He said that the company is considering all of its strategic options but then the company will proceed with creating new jobs.