A123 Systems falls on news of defect and new costs

AP News
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Posted: Mar 26, 2012 12:00 PM
A123 Systems falls on news of defect and new costs

Shares of A123 Systems tumbled by double digits to an all-time low Monday after the company said it would have to replace battery modules and packs that might be defective.

The battery equipment might contain defective components called prismatic cells, which were made at its factory in Livonia, Mich. There is a chance, because of the problem, that battery equipment could fail early, but does not pose a safety issue, the company said.

A123 Systems expects to start shipping replacement packs and modules to affected customers this week. The company said the cost of replacing the equipment will be about $55 million, and will be paid for over the next several quarters.

The defects were not found in prismatic cells manufactured outside the Livonia factory, the company said.

A123 Systems makes lithium ion batteries for electric cars. The company said it is taking steps to improve its manufacturing process, including the hiring in January of Chief Operating Officer Ed Kopkowski.

Kopkowski was previously vice president of operational excellence at auto supplier Dana Holding Corp. He has more than 25 years of management and operational experience in improving quality and reducing costs, the company said.

Shares of A123 Systems Inc. slid 18 cents to $1.52 in morning trading, giving up all of the gains from earlier this month when the company announced that it would supply Indian automaker Tata Motors with lithium ion battery packs for use in commercial vehicle hybrid electric systems.

Shares at one point fell to $1.48, surpassing a previous low reached in December.