What does A123 bankruptcy mean for Fisker?

A123 Systems, the bankrupt battery supplier for Fisker Automotive, wants to end the contract under which it supplies the Fisker's battery, Voelcker writes.

David Goldman/Boston Herald/AP
In this August 2007 photo, development technician Ronnie Wilkins reaches for development powder stored in a glove box used in lithium car batteries at A123 Systems Inc., Headquarters in Watertown, Mass. A recall by Fisker Automotive cost A123 more than $50 million, and was a contributing factor to the company's bankruptcy filing last month, Voelcker writes.

Fisker Automotive has had more than its share of trials and tribulations of late.

Now, a new threat has emerged that holds the potential to harm the company severely, by cutting off its supply of lithium-ion battery packs.

A123 Systems, its bankrupt battery supplier, wants to end the contract under which it supplies the Fisker's battery.

As reported a few days ago in the Dow Jones Daily Bankruptcy Review, Fisker objected in U.S. Bankruptcy Court to A123's bid to scrap the supply contract.

"In so doing, [A123] will saddle [its] estates and creditors with a claim of as much as, if not more than, $100 million," said Fisker in its filing, "and severely harm Fisker." 

Fisker has no other battery supplier, and the company is in the midst of a  recall of 2,000 cars to replace defective packs manufactured by A123.

That recall cost A123 more than $50 million, and was a contributing factor to the company's bankruptcy filing last month.

The Chapter 11 bankruptcy process allows companies to reject contracts that are below market value, but Fisker says there's no reason for A123 to do so until its automotive battery business is purchased by another company.

The buyer is likely to be either global auto-parts supplier Johnson Controls or China's largest auto parts company, Wanxiang Group Corp.

And if A123 succeeds in breaking the contract, Fisker's lawyers say the carmaker will immediately claim a "contract rejection damage claim in excess of $63 million" as well as $52 million for the cost of the battery pack recall.

Fisker suggests the move by A123 is no more than a negotiating tactic, and should be rejected by the court.

The claim will be decided tomorrow at a Bankruptcy Court hearing in Wilmington, Delaware. (READ MORE: 2012 Fisker Karma - Full Review)

Among other woes, Fisker lost more than 300 cars to floods and fire at the Port of Newark afterHurricane Sandy inundated a storage area where the cars were being kept.

In September, Consumer Reports slammed the Fisker Karma in a remarkably negative review, calling it "full of flaws" and deeming its touchscreen controls an "ergonomic disaster."

In August, a fire that badly damaged a 2012 Fisker Karma outside a store in Silicon Valley was attributed by the factory to a short circuit in a cooling fan in the engine compartment. Fisker recalled its cars to replace the fan.

That same month, Fisker named its latest CEO, Tony Posawatz, the second new CEO within a year after cofounder Henrik Fisker stepped aside.

An earlier Karma fire, in Sugar Land, Texas, burned the car to the ground, damaging the garage and house in the resulting conflagration. Fisker and owner Jeremy Gutteriez remain on adversarial terms.

In March, Consumer Reports bought its own Fisker Karma to test, which went dead midway through the first day of driving during a routine highway speed test.

The 2012 Fisker Karma went on sale roughly a year ago. Though Fisker will not say how many cars it has built or sold, the number is probably about 3,000.

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to What does A123 bankruptcy mean for Fisker?
Read this article in
https://www.csmonitor.com/Business/In-Gear/2012/1107/What-does-A123-bankruptcy-mean-for-Fisker
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe