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Lithium-ion battery maker A123 Systems Inc (AONE.O) said on Wednesday there was "substantial doubt" about its viability because the company expects to burn through cash and report steep losses over the next several quarters.
"There is no assurance that the company will be able to obtain such financing on favorable terms, if at all, or to successfully further reduce costs in such a way that would continue to allow the company to operate its business," A123 said in the filing with the U.S. Securities and Exchange Commission.
A123, which has contracts to make batteries for Fisker Automotive, General Motors Co (GM.N) and BMW (BMWG.DE), said it was looking to raise additional cash and is exploring "other strategic alternatives." A123 said in a regulatory filing that it could tap the capital markets for funds.
A123's Livonia plant was described as the largest lithium-ion factory in North America when it opened in September 2010 with a ribbon-cutting ceremony attended by U.S. Energy Secretary Steven Chu, as well as U.S. Senators Debbie Stabenow and Carl Levin from Michigan. President Obama called in for the event.
The losses stem from A123's recall of defective batteries built at its Livonia, Michigan, plant. The flaw came to light earlier this year when a Fisker Karma plug-in hybrid with an A123 battery failed during a test by Consumer Reports magazine.
The repairs will cost nearly $67 million and force A123 to rebuild its inventory.
The disclosure illustrates the sharp reversal of A123's fortunes since 2009, when the Obama administration granted it $249 million as part of a program to spur battery development.
Americans have been slow to adopt EVs and A123 was also hurt by its over reliance on Fisker. A123 spends $1.57 for every $1 in revenue it receives from Fisker, according to Dougherty & Co analyst Andrea James.
Fisker cut back its orders last fall. A123 reported a $125 million first-quarter loss, its largest-ever quarterly loss.
If A123 goes under (as it inevitably will), it is the first domino in a csacade of subseqent failures that will spread across the "industry," and take many otherwise-unrelated "green" frauds down with it:
Lauded during a visit by President Obama, A123 Systems was supposed to be a centerpiece of his administration’s effort to use $2 billion in government subsidies to jump-start production of sophisticated electric batteries in the United States.
Instead, the company, which makes lithium-ion batteries for electric cars, has stumbled along with the rest of the nascent industry and now threatens to give more ammunition to critics of the president’s heavy spending on new energy technologies.
But the company stumbled when it was forced to recall potentially defective batteries planned for use in the Fisker vehicle. And with the future market for electric cars in question, A123 might not survive solely on batteries for those models.
Instead, A123 is now hoping that the new technology it is unveiling Tuesday, called Nanophosphate EXT, will help it enter new markets. The company says the new electrolyte chemistry eliminates the need for heating and cooling in extreme temperatures. That would avoid the addition of costly and heavy temperature-management equipment and prolong the life of the battery.
The technology could be used to produce batteries for telecommunications equipment, military vehicles and hybrid gas-electric cars that employ start-and-stop engine systems. It also could yield batteries that could be used to replace the millions of ordinary lead-acid batteries in cars currently on the road.
“It’s a hedge against the market for electric vehicles,” Mr. Vieau said.
The company is hoping that the promise of the new technology will help persuade investors to back a $50 million convertible debt offering by the company.
One battery expert said the new technology’s extended life span could have an immediate impact on the luxury-car market.