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EV Battery Maker A123 Dropping Fast, Funding Needed

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There are sharp declines in the financial position of lithium-ion battery manufacturer A123 Systems, fanning in a lot of heat on this 10-year-old company founded and based on technology developed at MIT.

To have a more clear picture of how terrible the situation is A123 just posted a $125 million net loss in its most recent quarter – $40 million more than what it’d reported in the immediate preceding quarter.

Whereas a year ago it brought in revenue of $18 million, in this quarter’s reports there was only $11 million, despite having reported $40 million in the previous quarter- that’s a $29 million drop. The cash flow dropped from $187 million at the end of 2011 to $113 million at the end of 2012’s first quarter- a huge $74 million.

The bad performance and the resulting losses have been fueled by the fact that the company had sold a huge number of defective batteries to its customers in 2011 and now it has to replace them. But the warranty issues are not the only problem: A123’s high production costs lead to it losing as much as 57 percent of revenue for each sale made, a Dougherty analyst, Andrea James, estimates. That means that the ship is kinda sinking, and it’s a real pity.

In order to survive, the company needs to raise more money. It expects to close a $50 million round of financing this week. David Vieau, their CEO, still emphasizes on the hope to bring the cost of production low enough to reach profit by sometime next year.

A123 is just a reflection of the kind of difficulties startup cleantech companies go through. The company had raised $345 million in a 2009 IPO, and was given a $250 million grant by the U.S. government to help build a large factory in Livonia, Michigan. This far it raised over a billion in public and private funding. Just like Solyndra, they are probably facing the same Chinese threat of low prices and medium quality. I’m still puzzled how Apple does it these days with their high prices… however, they outsource everything to China, too.

I smell a trade war going on here.

[via technologyreview]

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