A123 (Nasdaq: AONE) confirmed a record loss of $125 million in the first quarter of 2012 and said it would seek debt financing as it struggles with a massive battery recall that will take up its existing factory capacity through the next
It’s the latest in a string of bad news for the Waltham, Mass.-based company around the March recall of batteries from its Michigan factory, built with hundreds of millions of dollars in federal and state grants and loan guarantees. A123 reported the recall in March, and revealed that it had played a role in problems for key customer Fisker and its plug-in hybried Karma sportscars. A123 laid off about 125 of its 850 Michigan employees in November, a move it blamed on reduced orders from Fisker, though it said it hoped to rehire them in the coming year
The recall is expected to cost $66.8 million, and it’s also going to take up A123’s manufacturing capacity for the next few quarters, though that will merely postpone, rather than cancel, orders from delayed customers, the company reported. A123 Chief Executive David Vieau said in a Tuesday statement that the defect that caused the recall has been corrected and that replacement production was underway.
A123 customers include Fisker, General Motors, BMW, SAIC Motor Corp., Tata Motors and Smith Electric Vehicles, though the company didn’t specify which were involved in the recall. The transportation sector remains A123’s most important line of business, although its grid storage business has been growing in the past year or so, with installations and orders that added up to 100 megawatts by the end of 2011, much of it in partnership with AES Energy Storage.
First-quarter revenue of $10.9 million was down 40 percent from $40.4 million in the fourth quarter of last year, when the company reported an $85 million loss. A123 also reduced its 2012 revenue estimates to $145 million to $175 million, down from an already-reduced $230 million to $300 million.