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Posted on Mon, Mar 26, 2012 : 10:05 a.m.

Michigan's A123 Systems acknowledges possibly 'defective' batteries

By Nathan Bomey

Battery maker A123 Systems this morning reported that it would have to spend $55 million to fix batteries “that may contain defective” cells.

The news marks the latest in a series of blows to the Massachusetts-based manufacturer, which employs about 700 people at its battery plants in Romulus and Livonia and about 40 at its research and government solutions division in Ann Arbor.


Batteries manufactured at A123 Systems' Livonia plant may have defects.

Photo courtesy of A123 Systems

The company temporarily laid off about 125 workers last fall after one of its top customers, California electric vehicle startup Fisker Automotive, delayed a key product.

Separately, A123 in December acknowledged a manufacturing error in the hose clamps in the internal cooling system of up to 50 battery packs.

The company reported a net loss of $85 million in the fourth quarter of 2011, up from $45.7 million a year earlier.

Today, the company said it had already begun manufacturing battery modules and packs to replace the possibly defective products shipped to its customers. The problem was traced back to A123’s Livonia facility.

“We have isolated the root cause of the defective cells and we are confident that we have pinpointed the source of the defect and corrected it,” A123 CEO David Vieau said in a statement. As a result of engineering analysis and testing, we believe this is not a safety issue, and we have determined the root cause and have taken corrective actions.”

Vieau also acknowledged “near-term operational challenges” associated with the fast expansion of manufacturing capacity at its Michigan plants but said he was “confident” the company would overcome its early problems.

Investors punished shares of A123 (NASDAQ: AONE) after this morning's news. The stock fell 11.8 percent to $1.50 within less than half an hour of the market's opening.

A recent review of A123 filings with the U.S. Securities and Exchange Commission showed that the company gets 51 percent of its revenue from two customers, including Fisker. Government contracts and subcontracts make up another 12.3 percent of A123’s revenue.

The company is actively trying to diversify its revenue base by winning more contracts for electric vehicle batteries and electric grid applications.

A123 landed a $249.1 million economic stimulus grant from the U.S. DOE in August 2009. That came after the battery manufacturer won $125 million in tax credits and incentives from the Michigan Economic Development Corp. in spring 2009 and a $10 million cash grant from the state in fall 2008.

Contact's Nathan Bomey at (734) 623-2587 or You can also follow him on Twitter or subscribe to's newsletters.


Local Lady

Sat, Mar 31, 2012 : 1:37 p.m.

I have friends working at A123 and truly hope the company succeeds. It is an American company employing Americans on modern technology.

Kai Petainen

Mon, Mar 26, 2012 : 7:32 p.m.

in some ways I'd argue that it's not the investors that punish the shares, but other stuff. in some ways, the insider selling also partially punishes the shares (people do pay attention to that). the company should put an end to all of that. this is a great article and important for folks in michigan to follow. A123 has implications for investors, politicians, industry folks, et cetera. thanks for writing this article, i'll briefly talk about it in class tonight.

Mike K

Mon, Mar 26, 2012 : 7:07 p.m.

$55 MM would certainly hurt this company. As an investor, I'm staying away. I don't care how much of our taxpayer money politicians heep on them.

Craig Lounsbury

Mon, Mar 26, 2012 : 4:38 p.m.

"Investors punished shares of A123 (NASDAQ: AONE) after this morning's news. The stock fell 11.8 percent to $1.50 within less than half an hour of the market's opening." actually this morning was barely a discernible blip on the ""Investors punished shares" radar screen. Pull up a chart since its IPO in September of 2009 and its been steadily downhill since December of 2009. Most of this stocks life has been investors punishing shares.

Alan Goldsmith

Mon, Mar 26, 2012 : 4:35 p.m.

The batteries apparently aren't only thing defective with this company:


Mon, Mar 26, 2012 : 4:21 p.m.

This is a real bunch of crap. I am sure the owners are paying themselves. They should have to pay back every cent they got from us, the taxpayers. Oh, and they didn't LAY OFF a very competent qualified person i know - they FIRED him.


Mon, Mar 26, 2012 : 6:54 p.m.

Check the stock prices over the last two years. The owners a losing a lot of money.


Mon, Mar 26, 2012 : 2:35 p.m.

I hope A123 succeeds. My biggest problem with Companies like Tesla, A123, Fisker, Solyndra etc. is that they are not profitable and they have no plan for profitability. The are living on tax dollars. JCI has made an investment in batteries.(A well run auto supplier that can make a profit) The Big 3 is profitable and they are making the best hybrids. A company like Tesla and Fisker make a piece of junk on the taxpayers dime that only millionaire limousine liberals can buy. While 2 of the big 3 were bailed out (because of healthcare liabilities to their unions) they are profitable and they do not depend on a constant stream of tax dollars for revenue.