Thursday, August 11, 2011

A123 snags GM battery contract, prompts shares to rise

By Kyle Alspach, Boston Business Journal

Shares in A123 Systems Inc. (Nasdaq: AONE) jumped 38 percent in morning trading, on news the Waltham battery producer won a contract from General Motors Company (NYSE: GM) to provide battery cells and components for electric vehicles.

The GM announcement said the specific vehicles and brands that will include the A123 components will be announced at a later date. The release also didn’t specify financial terms of the contract.

The contract comes at a critical time for A123, whose share price has been falling as investors and analysts have looked for proof the company could deliver on its potential. A123 has consistently seen quarterly net losses, most recently reporting a $17.5 million net loss for the second quarter of this year while generating $36.4 million in revenue. The company also pulled out of a project with a prominent customer, Chrysler, last year, after Chrysler introduced a competing vendor.

In March, A123 foreshadowed the GM announcement by saying the company had been chosen to produce batteries for a pure-electric vehicle by a “major” North American automaker, which the company had said would hit the market in 2013.

GM said in the announcement that its battery engineering teams have validated the A123 battery chemistry at GM’s Global Battery Systems lab in Warren, Mich.

GM said teams from both companies will now develop calibrations and software controls for the battery system, in preparation for production.