Thursday, April 25, 2013

A name change to 456 as easy as 123? Not quite - Automotive News


April 23, 2013 - 12:01 pm ET

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On March 22, A123 Systems Inc. became B456 Systems Inc.

Confusion followed the announcement and continues to follow the battery maker in the wake of its bankruptcy, said Jason Forcier, vice president of its automotive business.

Wanxiang America Corp., the U.S. arm of Chinese supplier titan Wanxiang Group, acquired the automotive, commercial and government assets of A123 Systems Inc., with plants in Livonia and Romulus, for $260 million in a bankruptcy auction in December.

Here's where the distinctions come into play: Wanxiang renamed its newly acquired assets A123 Systems LLC, attempting to benefit from the highly publicized name. (Note the LLC.)

But meanwhile in U.S. Bankruptcy Court, some of the unsold assets and debt remained under scrutiny, most notably with its claim against embattled carmaker Fisker Automotive. The bankrupt estate, under the guidance of a trustee, had 60 days to operate as A123 but then was forced to change its name under bankruptcy code.

Result? B456 Systems Inc.

Media jumped on a U.S. Securities and Exchange Commission filing that A123 Systems had changed its name to B456, many assuming that Wanxiang made the change.

Not the case.

I've explained the issue to my editors like this: Think of B456 like Old Carco LLC, the bankrupt estate of Chrysler after the automaker emerged in 2009.

But some media outlets and customers remain perplexed, Forcier said Friday after returning from customer and potential customer visits in Europe.

"It's created a lot of confusion, especially in non-U.S. countries where they don't have the same bankruptcy process," he said. "That was evident in my recent trip, but I hope it's starting to get cleared up. As the estate continues to wind down, it will take care of itself."

Meanwhile, in Michigan, the manufacturing plants of A123 -- not B456 -- are operational but not at full capacity, Forcier said. A123's local employment around Detroit is more than 500, he said, but well below its peak of around 1,000 a year ago.

The battery maker is making headway with automaker interest in the microhybrid space. A microhybrid uses a small ancillary battery -- lead acid like Johnson Controls Inc. or lithium-ion like A123 -- to power electric fuel-saving systems such as start-stop, etc.

"If you look at the next five years, that's where you'll see the majority of the business," Forcier said. "Where electric vehicle demand is driven by the consumer, microhybrid is a technology, like a turbocharger, where the OEMs are looking to improve fuel economy to meet the standards."

A123 is currently supplying 12-volt microhybrid lithium-ion batteries to McLaren Automotive and will begin shipping in larger quantities to Daimler AG, Forcier said.

But electric vehicle demand, or the lack thereof, continues to drag at the bottom line. Despite originally predicting breaking even in 2012, A123 now predicts the end of the cash burn in 2016.

"Capacity is underutilized here and elsewhere in the industry," Forcier said. "But we haven't cut our r&d efforts, and we're not willing to cut other areas any further, which may push out the break-even."

If the battery maker breaks even, that means microhybrid technology has gone mainstream or electric vehicles gained significant traction.

And until then, almost nobody cares whether it's A123 or B456.


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