A123

Fraught battery manufacturer A123 Systems has been handed salvation in the form of a US $465 million investment from Chinese car-parts maker Wanxiang Group Corporation.

This will result in Wanxiang, one of China’s biggest non-governmental companies, owning 80% of A123 and holding four of the nine board seats for A123.

Earlier this year A123 announced it was running out of money, despite a cash injection from the Obama administration in 2009. This new investment could mean a government funded business will be in the hands of a non-US company that could out-source jobs.

The Michigan based battery maker has suffered because the EV market has failed to take off as quickly as hoped, only accounting for 3% of US car sales last year. For the second quarter of 2012 it reported losses of US$ 82.9 million so is in desperate need of help. A123 has 2 500 workers whose job security rests on the secure future of the company.

Things are looking gloomy for Massachusetts-based A123 Systems Inc as the money is close to running out.

Share prices have plummeted following the recall of hundreds of defective battery packs from one of its Michigan plants and now the company is trying to sell more shares to rescue itself from financial ruin.  This setback cost the company US$51.6 million last quarter, as it had to recall and replace the faulty batteries.  This blow was preceded by one of A123’s major customers cutting its order for batteries after saying it would be building less electric vehicles. 

A123 lost US$125 million in the first quarter of 2012 and has yet to turn a profit since it first sold stock publicly in 2009.  In 2009 shares peaked at US$25 a share but are now just over one. A123 must sell a lot of shares to stay afloat and cover its operating costs.

This comes just weeks after the firm announced plans to unveil a new technology, which they claim would allow batteries in hybrid and electric vehicles to operate at extreme temperatures.  The batteries, called Nanophosphate EXT, would cut the cost of production and reduce costs.

The idea is to eliminate the need for separate heating and cooling systems in lithium-ion batteries.  Chief executive David Vieau called it a "game changer" for the electric vehicle and telecommunications markets.  Production of Nanophosphate EXT is planned to start in 2013 to cover orders put in by a German automaker.

Researchers at Ohio State University said the batteries performed impressively at high temperature without losing storage and power generating capabilities. The testing has shown the battery can retain more than 90% of its initial capacity at 45 and deliver starting power at -30°C. 

The announcement of this development led to an upsurge in A123 shares which had been struggling around the US$1 mark for weeks, rose to US$1.58 last month.

This July the price is back down.  Vieau’s promise to “power through it” may sound hollow in the face of plummeting share prices but he is determined to help A123 ride out the storm.  His plan is to raise funds selling stocks and warrants while trying to attract customers to buy A123’s products, unfortunately for Vieau this market is looking saturated.