The pluses, minuses, and pluses of A123's battery business

Battery maker A123, founded in 2001, once had high hopes of profiting from the use of its lithium ion batteries in hybrid and all-electric vehicles such as the Chevy Volt, as this account from EE-Evaluation Engineering's then editorial director Paul Milo back in July 2008 shows.

But those hopes didn't pan out—at least not smoothly. Daniel Gross in Slate has an interesting piece tracing the company's rise—including becoming eligible for a $249 million government grant in 2009 followed by a well received IPO—through its bankruptcy in 2012 and revival under new ownership by Chinese manufacturer Wanxiang in 2013.

Gross notes, “Toyota and Nissan preferred to use other suppliers for the batteries that would power the Prius and Leaf, respectively.” He quotes Sam Jaffe, an analyst at Navigant Research, as saying, “In the automotive space [A123] had a lot of trouble getting a client.”

But A123 had also been pursuing grid-storage operations. Writes Gross, “At facilities in Westborough, MA, and Chesterfield, MO, A123 started stuffing loads of lithium ion batteries inside shipping containers and pitching them to utilities.” In response to government mandates for grid battery installations, the business gained traction, and in May 2013 Wanxiang created a separate business unit named A123 Energy Solutions with headquarters in Massachusetts.

In yet another twist, in March A123 announced it would divest the grid-storage business, as well as telecom and IT data storage businesses, selling them to NEC, which intends to incorporate them into its Smart Energy Business Unit. Facilities Westborough, MA, and Chesterfield, MO, are included in the deal, the company said, adding that it will retain all of its cell manufacturing locations globally, including those in Michigan and China, and become a cell supplier to NEC.

Why this divestiture? The company intends to refocus on transportation—in particular, selling 12-V batteries for microhybrid vehicles. “Our move to sharpen focus on current and future customers in the global transportation market demonstrates strategic clarity in our business,” said Jason Forcier, CEO of A123 Systems, in March. “Our customers and partners around the world will benefit from the organization focusing its R&D strength and system engineering capabilities on clear priorities. We look forward to continued growth as a provider of leading-edge energy storage technology to the world’s vehicle manufacturers as they continue to develop the most economical forms of electrification.”

As Gross writes in Slate, “Electric cars may not be taking off, but the electrification of cars certainly is. In order to meet the stringent new mileage standards, car makers are deploying batteries in new ways—in hybrid-lite systems, and to enable fuel-saving technology that turns engines off when they idle.”

Gross concludes, “The American taxpayers and shareholders will never get all their money back from their ill-fated investment into A123. But that doesn’t make it a loser.”