The bankruptcy of American battery maker A123 Systems was another blow to President Obama’s green energy loan program. Yet as the consolidation of the battery industry continues, crucial questions are arising about the deals made between battery makers and electric car companies. While A123 wants to void a contract it made with Fisker Automotive, Fisker says that would disrupt the deployment of its plug-in hybrid Karma.
A123 is currently in legal limbo, with competing bids from both Johnson Controls and China’s Wanxiang Group. But the real battle is in bankruptcy court, where A123 wants a judge to void all of its current contracts…including one with Fisker. With 25% of its revenue coming solely from Fisker, it is not much of a leap to imagine that this contract helped usher A123 into bankruptcy.
No doubt, the failure of the electric car market to mature is hurting battery makers including A123, who were hoping for a lot more volume by this time. Fisker’s own sales numbers have been far off from their own projections, but the automaker argues that by voiding the current contract, production of the Karma plug-in hybrid would be stopped. Fisker could not find a replacement battery maker quickly enough to avoid a work stoppage.
That would further hurt the image of Fisker…but it sounds like if A123 Systems is to survive, it simply must void its contract with Fisker. A123 took a big hit when it had to recall and replace defective batteries to Fisker, and while it has contracts with other companies including Black & Decker and Navistar, Fisker was by far its most important client.
I’ll be keeping an eye on this story; it seems to me one company or another is about to get screwed though. Considering both Fisker and A123 Systems received taxpayer money, you can the howling about this bankruptcy is just beginning.
Source: The Truth About Cars