A123 Systems' Cell Family

A123 Systems warns of financial danger, and is selling more stock

The financial woes befalling A123 Systems led management to issue a "going concern" warning, to tighten up expenses, and sell more stock, as the company faces steep losses due to defective battery packs and slow ramp up of production at partners including Fisker Automotive.

Battery maker A123 Systems warned this week that its current financial status raises "substantial doubt on the Company’s ability to continue as a going concern," which lead some misguided theorizing that this is the "next Solyndra." This move is unsurprising given the recent history of A123 Systems, a company that has had a mixed bag of problems stemming not only from failures of the company, but slow production ramp-up in the company's partners. The company is taking steps to shore up its finances, and may well navigate its way to a safe shore.

The problems at A123 Systems center on three areas: First, the company's major partner, Fisker Automotive, was slow to get into production, which not only caused Fisker's Dept. of Energy loans to be frozen, but threw A123's business plan into disarray. Second, quality problems with the company's battery packs caused a recall affecting not only Fisker's Karma, but other vehicles using A123 packs. The ensuing "field campaign" is costing the company over $65 million, and perhaps loss of goodwill with its partner companies. Finally, the company has itself admitted in SEC filings a strategic mistake of overly depending on Fisker Automotive to provide revenue, and when Fisker didn't ramp up production as expected A123's revenue did not ramp up as expected.


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