A123 Systems to post $125 million Q1 loss after battery recall
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DETROIT (Reuters) -- A123 Systems Inc, the U.S. lithium-ion battery maker, said it expects to show a first-quarter net loss of about $125 million, including costs from a recall of potentially defective battery packs.
The company, which received a $249 million grant from the Obama administration as part of a program to develop advanced batteries, said the cost of recalling the battery packs will be $66.8 million.
The quarterly loss is due to the recall campaign and "low factory utilization" of A123's plant in suburban Detroit that the 2009 U.S. Energy Department grant helped pay for.
The expected $125 million net loss is a rise of 133 percent from the first quarter of 2011 according to a company filing with the U.S. Securities and Exchange Commission.
A123 Systems, which sprang from laboratories at the Massachusetts Institute of Technology, said it expects to show first-quarter revenue of $10.9 million, 40 percent lower than a year earlier.
A spokesman for the company declined to comment further than the SEC filing. More detail about the company will be revealed in a conference call May 15, when A123 issues fuller financial results, the spokesman said.
The low plant use, A123 told the SEC, "also contributed to significantly reduced gross margins on products sold, as anticipated cost savings related to volume production were not realized."
Research and development and engineering expenses associated with hiring new employees also contributed to the loss, A123 said.
In late March, A123 announced it was replacing battery modules and battery packs that could fail due to a manufacturing defect, which led to a high-profile shutdown of a Fisker Karma electric car while it was being tested by consumer watchdog Consumer Reports.
Privately held Fisker is a key customer for A123.
A123 said it was expected to show a loss of $51.6 million in warranty expenses from replacing battery packs and modules in the recall campaign for product already in the field. Also, it was expected to show a cost of about $15.2 to replace batteries that had been in inventory but not yet shipped.
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