A123 Systems, the company that supplies the battery packs for Fisker Automotive, has filed for bankruptcy protection. The company has been linked to faulty batteries and wasn’t able to secure enough revenue to pay its debts.
Bankruptcy protection sought by A123 Systems
A123 Systems, a lithium-ion battery manufacturer mostly known for supplying the battery pack for the perpetually beleaguered, breaking and prone-to-fire Fisker Karma, has filed for bankruptcy protection after failing to meet debt payments, according to Bloomberg. A123 listed debts of $376 million and assets of $459.8 million in the filing in bankruptcy court.
The company was due to make a payment on a $143.8 million pool of promissory notes, but informed investors it would be missing the payments and prepared a bankruptcy filing.
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A123 Systems Inc., in 2009, received a $249.1 million federal grant to make lithium-ion batteries, as part of a $90 billion green energy initiative championed by the Obama administration, according to Reuters. It isn’t the only company to have received such a grant to go bankrupt, as others who have filed for bankruptcy include Beacon, Abound Solar, Ener1, the parent company of battery maker EnerDel, and perhaps most notoriously, Solyndra.
Financial and battery woes plague battery maker
A123 Systems had been shopping for a buyer, according to Reuters, and had at least two suitors, as it were, that were interested, one of which would have acquired a majority stake. Wanxiang Group, a Chinese outfit, was said to have agreed to invest $465 million in A123, according to Bloomberg, which would have given Wanxiang an 80 percent state. However, it appears to have fallen through.
In the meantime, auto parts and battery supplier Johnson Controls, Inc., according to the Wall Street Journal, has loaned A123 $72.5 million for the bankruptcy case, acting as debtor-in-posession. Johnson, according to Reuters, is also a lithium-ion battery producer for the automotive industry and earlier this year purchased A123 System’s automotive division.
Aside from corporate woes, part of the issue behind A123’s failure is that the Fisker Karma battery pack recall left the company reeling from the fiscal damage. Earlier this year, according to Reuters, A123 had to recall the batteries in a number of Fisker Karma models. The company had to spend $66.8 million on the recall and posted a loss of $125 million for the first fiscal quarter of 2012.
Battery maker as plagued car maker it supplies
A123 Systems appears to be in as much trouble as Fisker Automotive, its main customer. The Fisker Karma has been plagued with trouble, including a recall, two fires, a lemon-law buyback and major financing issues involving funds from the federal grant to Fisker being frozen. However, if one desires a plug-in hybrid, financing for auto loans is highly available as are the Chevrolet Volt and upcoming Toyota Plug-in Prius and Ford C-Max Energi.
Fisker’s next model, the Atlantic, according to AutoGuide, was recently delayed yet again. Originally supposed to launch in 2013, the car will not see production until 2014 at the earliest, possibly 2015. The Atlantic is supposed to go one sale at $55,000 ostensibly as a green rival to the BMW 3 Series.