A123 Goes 3,2,1,0

On October 12, the lithium-ion battery maker A123 (NASDAQ: AONE) essentially ran the white flag up the pole:  filing for Chapter 11 bankruptcy, agreeing to sell its automotive-related assets to Johnson Controls (NYSE: JCI), and fielding bids for its grid-storage business.

This is a big come-down from a company that not long ago had a market capitalization of over $2 billion, and was viewed as a high-flyer in the cleantech sector, having been one of the few VC-backed cleantech companies to achieve an IPO.

Alas, the markets for A123’s batteries — both in electric vehicles and on the electricity grid — didn’t grow as rapidly as many had anticipated.  Frankly, that isn’t terribly surprising, given how risk-averse and conservative the automotive and electricity industries are in adopting new technologies.  Not to mention, the economics just aren’t there yet, and while battery costs have come down and battery performance has gone up, continuing subsidies on fossil fuels makes the breakeven point challenging.

A few months ago, A123 had announced plans to obtain financing from Wanxiang, a Chinese manufacturer of auto parts, that would have kept A123 afloat (although may have only postponed the inevitable).  The proposed deal produced a din of objections that American-funded battery technology shouldn’t end up in foreign (especially Chinese) hands.  So, now it won’t, though I’m sure that holders of A123 equity aren’t particularly happy about the consequences.

As noted in this reportage by Forbes, the demise of A123 as a company doesn’t mean the demise of its technology — or of the benefits to American customers from using its technology or American employees in making products based on its technology.  This point is no doubt lost on those who bitterly complain about A123 having received U.S. government financial support as yet another bad investment and more evidence that the public sector is lousy at and therefore ill-advised to “picking winners and losers”.

As is often the case, only time will tell.  It will be interesting to report in a few years on how much value Johnson Controls will have been able to generate with A123’s technology.  And only then can a true reckoning be made of the cost-benefit of U.S. public financial support for this technology.

9 replies
  1. Rob Peterson
    Rob Peterson says:

    Richard,

    This is Rob Peterson from Chevrolet Communications.

    The Chevrolet Volt does not use components from A123 Systems. The Volt's battery is assembled by General Motors in a facility outside of Detroit using li-ion cells supplied by LG Chem. Your prompt correction of the post above is appreciated.

    Thanks,
    Rob

  2. David Herron
    David Herron says:

    You should really think about doing some research before spouting nonsense, and repeating misinformed untruths.

    The Volt uses batteries manufactured by LG Chem, not A123 Systems. This bit of information was widely widely widely reported in 2008ish when GM chose LG Chem over A123.

  3. UpstateGreenGuy
    UpstateGreenGuy says:

    LG Chem makes the battery for the Chevy Volt. A123 does not, and while they did compete for the Volt business, they did not win that contract. They did subsequently win the contract for batteries for the Chevy Spark EV.

  4. Guest
    Guest says:

    The Volt uses batteries from LG Chem. Though GM had announced they would use A123 batteries for an upcoming city ev on the Chevy Spark platform. A123 did have current contracts with BMW and Fisker Automotive.

  5. Robert Magee
    Robert Magee says:

    Good lord Richard, do your research before taking to the keyboard !!! The lithium ion batteries for the Chevy Volt are supplied by LG Chem, NOT A123:

    http://media.gm.com/content/dam/Media/microsites/

    Which totally blows your premise that GM urged Johnson Controls “to pick up the A123 pieces so that GM could be assured of continuing supply” out of the water.

    You may or may not be confusing the issue with GM’s choice of A123 batteries for their upcoming Chevy Spark EV. The Spark is a very limited production vehicle to be sold in only a few US markets – hardly sufficient to cause significant supply headaches for GM.

    At the risk of sounding unkind, I would expect better from a successful managing director of a venture capital firm. There’s far too much misinformation about the Volt floating around the web already.

  6. Richard Stuebi
    Richard Stuebi says:

    Commenters above,

    I apologize for erroneously suggesting in this post that the Chevy Volt uses batteries from A123, when in fact the supply is from LG. The error is wholly mine in not conducting sufficient fact-checking. I have deleted the offending paragraph, and the remaining contents of the posting still pertain.

    Richard Stuebi

Trackbacks & Pingbacks

  1. […] On October 12, the lithium-ion battery maker A123 (NASDAQ: AONE) essentially ran the white flag up the pole:  filing for Chapter 11 bankruptcy, agreeing to sell its automotive-related assets to Johnson Controls (NYSE: JCI), and fielding bids for its grid-storage business. A friend of mine who drives a Chevy Volt, which uses battery components made […] Cleantech Blog […]

Leave a Reply

Want to join the discussion?
Feel free to contribute!