A123 Systems' Cell Family

A123 Systems to spend $55 million replacing defective battery packs

A123 Systems announced today company engineers had found a manufacturing flaw requiring the company replace, costing the company $55 million, a large number of nanophosphate lithium ion battery packs manufactured by the company for five electric vehicle manufacturers.

A123 Systems announced this morning the company had discovered a manufacturing flaw in prismatic format nanophosphate lithium battery cells. The flaw affects electric vehicles from five unnamed manufacturers, and the company is starting a "field campaign" to replace affected battery packs. The campaign is expected to cost the company $55 million in warranty charges and affects five unnamed electric vehicle manufacturers.

The manufacturing flaw was found late last week by A123 Systems engineers who were diagnosing a failure in a battery pack received from a customer. The company's procedure in such cases is to run a forensic analysis to determine the root cause of the failure, then determine how pervasive the problem is. In this case the problem was found to have a significant impact affecting a large number of battery packs. The company chose to take action quickly, and transparently, because of the scale of the problem.

In a conference call this morning David Vieau, CEO of A123 Systems, said “Recently, A123 has discovered that some prismatic cells made in our Livonia facility may contain a defect which can result in premature failure of a battery pack or module that includes a defective cell. We have isolated the root cause of the defective cells and we are confident that we have pinpointed the source of the defect and corrected it. As a result of engineering analysis and testing, we believe this is not a safety issue, and we have determined the root cause and have taken corrective actions."

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