Days before it announced the hirings, A123 filed a form with the SEC stressing its financial difficulties.
Its troubles stem from failure of its lithium ion batteries. A Karma fitted with an A123 battery failed in March during a test by Consumer Reports. Replacing the defective batteries is expected to cost A123 $66.8 million, including a $15 million inventory charge. The announcement devastated A123's stock price, which hit its lowest mark of 82 cents per share on April 4.
The problem was linked to an incorrect calibration of one automated welding machine in Livonia. The flaw could cause an electrical short, leading to failure of the battery, the company said.
Despite manufacturing problems at its Livonia plant and slow electric vehicle sales, Jason Forcier, vice president of A123's automotive solutions group, said the company's power grid and commercial transportation businesses are "more than offsetting" problems with EV batteries.
A123 gets nearly 40 percent of its revenue from grid energy storage projects and markets such as medical and communications, said A123 spokesman Dan Borgasano. Commercial transportation and passenger vehicles make up the remaining 60 percent.
The company expects the business to move to 50 percent transportation and 50 percent power grid and other markets, Borgasano said.
A123 supplies lithium ion batteries from its Livonia plant to Southern California Edison, Maui Electric Co., Spain's Red Eléctrica Corporación SA and others. Its commercial transportation customers include FedEx Corp. and India-based Tata Motors Ltd.
Maui Electric installed an A123 battery at a substation in the resort community of Wailea. The $2 million battery and controls will supply 1 megawatt-hour of energy storage to reduce peak load by as much as 15 percent, according to a report by Greentech Media Inc.
A123 has 10 commercial transportation projects set for production this year, Michael Lew, senior analyst at New York investment firm Needham & Co., wrote in an analyst note last month.
"However, we believe all these programs are at risk given A123's recent shortcomings, and we would be surprised if customers have not already begun to seek alternate battery suppliers," Lew wrote.
Lew is also skeptical of A123's planned timetable to hit profitability by 2013.
"If I'm an auto manufacturer and see the sorts of issues A123 is having, I may look to another company, one with more experience," Lew said. The quality control "issues were surprising, and there are companies like Johnson Controls and LG Chem that have significant automotive experience coming to market."
Forcier said the company has resolved its quality-control problems and that its automotive unit continues to grow.
In the midst of its manufacturing shortcomings, A123 announced new automotive contracts with Chinese automaker Zhejiang Geely Holding Group, the parent company of Volvo Car Corp. It also announced contracts to supply 12-volt engine start batteries for use in stop-start systems for three European automakers, including McLaren Automotive and an unnamed German automaker that will use the battery in a 2013 model.
A123 also makes batteries for the hybrid versions of the BMW 3 series and 5 series and for the 2013 Chevrolet Spark electric, which A123 will begin supplying in the last quarter of the year.
"In automotive, I think we're still doing very, very well," Forcier said.
A123 also last week debuted a nanophosphate lithium ion technology expected to operate under extreme temperatures, which has been a shortfall of lithium ion batteries for vehicles.