# A123 Having Financial Trouble



## toddshotrods (Feb 10, 2009)

http://wot.motortrend.com/lithium-i...-be-heading-for-financial-trouble-212195.html
I'm not trying to make a point, just passing along something I saw. I actually see all this stuff as teething problems, as the industry grows and tries to find a path to viable technology and profitability. It is interesting though that the major manufacturers of the vehicles and the technology seem to have a lot of the same problems the DIY community has. There seem to be real issues that need to be resolved, not just (a lack of) money. No matter how many millions and billions are thrown at it, the problems resurface.

It'll be some DIYer in his garage, with a converted Yugo, that solves them.


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## MN Driver (Sep 29, 2009)

A123 has had quite a bit of problems with money. It dumped cylindrical cells on the market when their deal with Chevy for the Volt dropped out. Not sure if they are still working with GM but that might save them if they setup a contract, if they haven't for the Spark EV already(haven't paid attention to the status of that). Fisker issues happened and cost them a bunch and I'm assuming they expected far more business from that too. Seems the only real money they are making and have made before, reliably, has been with the power station load balancing projects and power tool cells.

...I could be off on this, and I probably am but it seems they have the R&D down and swallowed lots of funding for development so hopefully they get these cells into some cars but it seems things are drifting towards Lithium Manganese spinel chemistries for cars. I wish them the best, the USABC testing makes them look very suitable for a car, especially when looking at the hybrid type of short DOD cycling tests, seems they would last nearly forever if held very close to 50% SOC to provide additional HP to shrink engines and still maintain short term acceleration performance which is mostly the point of hybrids destined for the highway and the reason I own one, I rarely touch the battery with my 2000 Honda Insight and bought it primarily for the small lightweight super efficient body and engine.


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## nucleus (May 18, 2012)

*The Bright Side of A123 Having Financial Trouble*

I read a report that said that it cost A123 $1.57 for every dollar of batteries that they sold. 

That means that we are getting them under cost.

In fact, this is likely the case for Lithium batteries generally. The chinese have pumped in lots of money, and the Americans less.

The chinese money goes to factories and then various business entities make a go of it, likely selling their batteries below cost, why else would they go out of business?

I don't think it bodes well for the long run, but right now we are likely getting lithium batteries for less than what they cost.

Nucleus


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## mizlplix (May 1, 2011)

According to the last EVTV the A123 problem is a little more than "teething" problems. They are operating without any constraints, plans or control. They are the text book example of "how not to do it". 

I am extremely sorry to see them go. It looked like the start of American presence in the Lithium race.

Step 1 in their plan was to not be "Made in the USA". A shell game.

Step 2 was to get taken by their suppliers.

Miz


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## toddshotrods (Feb 10, 2009)

mizlplix said:


> According to the last EVTV the A123 problem is a little more than "teething" problems...


I was referring to the industry as a whole, when I said teething problems, not specifically A123.





mizlplix said:


> ...I am extremely sorry to see them go. It looked like the start of American presence in the Lithium race...


Wow, what did you see that has you throwing flowers on their grave Miz!  A company bleeding money is nothing new, that's a common story and many of them get through it and back/on to profitability. I doubt many (any?) are reporting a profit from EVs right now, because this is the investment phase, where tons of money, time, and energy, are expended to grow a "new" industry. Wide spread adoption is needed for profitability, and that's a "few" years out...


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## jeremyjs (Sep 22, 2010)

Even if they do go under it's not like they'll be gone. They own hundreds of millions in property, production equipment, and Intellectual Property. If they go bankrupt someone will probably just buy them, restructure, and go on about the business of making batteries with their tech.


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## Ziggythewiz (May 16, 2010)

I dunno...I think most of the machinery is owned by Chinese or Koreans and they can be indifferent to IP at times.


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## toddshotrods (Feb 10, 2009)

Okay, now I see. The first artical I read didn't paint the picture of how bad it is. It would probably not be good for us if GM buys the company. 

http://www.reuters.com/article/2012/05/30/us-a123-goingconcern-idUSBRE84T1LE20120530

http://gmauthority.com/blog/2012/06...y-supplier-a123-systems-in-financial-trouble/

Their losses will be more than they're worth (market cap)...


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## mizlplix (May 1, 2011)

I guess you might say I was reading between the lines when I was predicting doom. 

1. They promoted themselves to congress (and all of us) as an American battery manufacturer. Reality is that they are an importer at best. True, they might assemble some cells domestically, but the pouches are not made here.

2. They seem to have cash flow problems. AT one time, Congress was talking about delaying the balance of their funds because their stated goals had not been met.

3. Watch the introduction to last fridays EVTV. They both touch on A123. There was a lot of snickering and other unclear insinuation.

SO, I made the above post based on that. I did not say I was glad in any way. Early on, I was standing along side everyone else cheering them on.

I would still see them pull it out of it's slump, but it looks less than good.

I would absolutely love buying My cells from an American manufacturer.

Miz


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## JRP3 (Mar 7, 2008)

mizlplix said:


> 1. They promoted themselves to congress (and all of us) as an American battery manufacturer. Reality is that they are an importer at best. True, they might assemble some cells domestically, but the pouches are not made here.


I'm not sure that's accurate. Their tab welding machine alignment problem that produced defective pouch cells was in their Livonia Michigan plant. 
http://www.greencarcongress.com/2012/03/a123-20120326.html


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## toddshotrods (Feb 10, 2009)

JRP3 said:


> I'm not sure that's accurate. Their tab welding machine alignment problem that produced defective pouch cells was in their Livonia Michigan plant.
> http://www.greencarcongress.com/2012/03/a123-20120326.html


Thanks JRP3, that whole article has a lot less of the FUD tone, and make it sound more like they might be able to weather the storm... I really hope so.


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## JRP3 (Mar 7, 2008)

On the other hand that article is over a month old, things are looking worse since then. I'm an A123 stockholder too 

http://www.greencarcongress.com/2012/05/a123-20120531.html


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## toddshotrods (Feb 10, 2009)

JRP3 said:


> On the other hand that article is over a month old, things are looking worse since then. I'm an A123 stockholder too
> 
> http://www.greencarcongress.com/2012/05/a123-20120531.html


I see, that sucks then...


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## LithiumaniacsEVRacing (Oct 9, 2010)

Gentlemen,

I also was an AONE investor. I have now sold all my shares. A123 will not live much longer, they have too many flaws in their business model. The #1 flaw is only selling product to OEM sales, if they opened their products to the EV conversion world, then they would have doubled their sales. Why can Japan, South Korea, and China sell to OEM and EV conversion shops and A123 cannot?

As much as I want USA to grow with lithium battery sales, I have no pity for stupidity!


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## JRP3 (Mar 7, 2008)

Probably a good time to sell with the recent price bump but I'm waiting to see if they can hang on and do something with the new cells.


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## Caps18 (Jun 8, 2008)

It would be nice if you could buy 24V or 48V, 100 Ah batteries.

I can see how it would be difficult to make full 120V-156V packs for different cars and trucks in a single product, but it would be nice if I could buy a full pack with battery rack right from them or a side company.


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## Ziggythewiz (May 16, 2010)

They do make larger packs, that's what went into the Karma. They just don't want to sell to DIYers (and if they did you couldn't afford it), and other channels get you the recalled packs.


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## JRP3 (Mar 7, 2008)

They also make 12V batteries. Don't know if the general public can buy them, and they will probably be much too expensive anyway.


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## JRoque (Mar 9, 2010)

Hi. My wild-ass guess is that A123 was trying to cover some other unaccounted for spending when they came up with the recall figure. I just can't believe that a company of this size and volume would have to spend $50M to recall packs. How many exactly did they sell that is costing them this much to fix?

Why would they choose to apply the recall cost all at once is another puzzling move. First of all, that's why they pay insurance. File a claim against the defective packs and let the policy help you pay it off. But if you can't, then split those costs by quarter as you work on the packs. Maybe even push some of the losses for next year. I think they were too quick admitting quilt without having a proper remediation plan that included protecting the company.

JR


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## JRP3 (Mar 7, 2008)

Well they had faulty cells that were failing, they had to act quickly or have a bunch of dead cars or cars that couldn't be manufactured. Companies considering their cells needed confidence that they could deliver.


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## toddshotrods (Feb 10, 2009)

The costs are a lot higher than they appear to be, in circumstance that like that. One, the cells have to actually be replaced meaning it cost you double just to keep your product in those customers' products - double the total business expense (materials, labor, utilities, overhead, etc). Then, you have to ship the bad cells back to the factory, and safely dispose of them, ship the new cells to the customers, probably cover a significant (if not total - it was their fault) amount of the cost of replacing them in whatever they were in. Then, the cells you shipped out to replace them were inventory that no longer exists, so you have to produce more cells to meet demand (again total cost of production, most likely at increased costs due to the need to temporarily bump up the supply chain).

Add to that the lost production time that the machines were down, to find and correct the problem, and all the modern big business (PR) expenses to "manage" the situation. A nice strategy in that was the release of information on the new technology, which triggered a little bump in the stock price to help with the financial uncertainty issue. I wonder how much it cost them to get accelerated results from OSU...

Modern business is rarely measured in a dollar out/two dollars in formula. It's a complex equation that accounts for a LOT of variables, and is usually based on a lot of "ifs". A part of that "loss" was probably also because this disruption cancelled out a lot of the "ifs" that were necessary to even claim, having broke even or turned a profit, later. Hearing them say "loss" doesn't necessarily mean money out of the bank account today, it could mean money that won't ever see the bank account that their plans were counting on - like the sale of all the cells that went out to replace the bad ones.

Edit: It also likely incorporated the anticipated drop in market value (that's one of their main sources of funding). That's why I said the big news was a good strategy because it mitigated some of those losses. If too many shareholders sell off, you don't have as much capital to invest and operate - technically, that's a loss...


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## JRP3 (Mar 7, 2008)

They actually replaced entire modules, not just cells, since the cells are welded in place. That's why we are suddenly seeing so many A123 modules in the hands of Chinese resellers, most of them with defective cells. So if there was a single bad cell in a 24S3P module the whole thing would be replaced.


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## toddshotrods (Feb 10, 2009)

JRP3 said:


> They actually replaced entire modules, not just cells, since the cells are welded in place. That's why we are suddenly seeing so many A123 modules in the hands of Chinese resellers, most of them with defective cells. So if there was a single bad cell in a 24S3P module the whole thing would be replaced.


Good point.


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## JRoque (Mar 9, 2010)

I can almost see it: "Boys, we're going to make these modules unrepairable so the customer will have to buy a whole new one if one cell goes bad... you know, the iPhone! We'll make millions!". Oops.

JR


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## jeremyjs (Sep 22, 2010)

JRoque said:


> I can almost see it: "Boys, we're going to make these modules unrepairable so the customer will have to buy a whole new one if one cell goes bad... you know, the iPhone! We'll make millions!". Oops.
> 
> JR



I have to say I think the whole pouch cell thing is a rather stupid way to make a "large" format cell. I makes the whole process of making a battery pack unnecessarily expensive and difficult. That's one place where the Chinese cell manufacturers have it figured out. Along with actually selling their cells to people who want to buy them.


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## JRP3 (Mar 7, 2008)

JRoque said:


> I can almost see it: "Boys, we're going to make these modules unrepairable so the customer will have to buy a whole new one if one cell goes bad... you know, the iPhone! We'll make millions!". Oops.
> 
> JR


It's really more to do with fast and easy automated manufacturing. Welding is fast and creates a solid low resistance connection. They just need better QC on the cells before they go into a pack.


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## toddshotrods (Feb 10, 2009)

Agreed J. No volume manufacturing operation can guarantee 100% quality. In the grand scheme of things, they would rather have this happen now, than someday have tens or hundreds of thousands of electric cars on the road with their product in it and find out there's a serious problem. These are the experiences that create better QC systems. This is all new and there will be plenty of kinks to work out of the system to make it work as smoothly as we're used to having things. People have a convenient habit of forgetting how much time and development, plus failures and hurdles, created the things we take for granted on a daily basis.


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