A123 to spend $55M replacing battery equipment

 Shares of A123 Systems tumbled to an all-time low on Monday after the maker of batteries for electric cars estimated that it would spend about $55 million to replace battery modules and packs that might be defective.

 A123 said the problem does not pose a safety threat, but customers' battery equipment could fail early. Five customers — including Fisker Automotive, the company's biggest client — received parts that could have had defective cells, A123 CEO David Vieau said Monday during a conference call.

The $55 million represents as much as one quarter of this year's projected revenue, which A123 has estimated between $230 million and $300 million. The company, which went public in September 2009, has yet to turn a profit.
"I don't think (A123 Systems) is going out of business, but it's a squeaker," said Wunderlich Securities analyst Theodore O'Neill. The company's cash could run short within nine months, O'Neill said.
A123 Systems expects to start shipping replacement packs and modules to affected customers this week. It will cover the cost to replace the equipment over the next several quarters. The company would not identify which customers are affected nor how many batteries in total will be replaced. But in a separate statement Monday, Fisker said it would replace the battery packs for its customers.
O'Neill said the replacement process is so expensive because each battery pack contains more than 300 cells. If just one cell is defective, it can ruin the entire battery pack. So A123 Systems will have to replace a wide swath of batteries, O'Neill said. A123 has sold more than 4,000 batteries to Fisker alone, he estimated.
Vieau said A123 has sufficient cash to pay for the replacements. But the company will likely adjust its fundraising strategy because of the additional cost, he said. Spokeswoman Courtney Kessler said the company wasn't outlining specific ways it might raise more money, but it plans to give an update on the matter during next week's earnings conference call.
A123 said the affected equipment was limited to products made in its Livonia, Mich., factory. It said it has been taking steps to improve its manufacturing process, including the hiring in January of Chief Operating Officer Ed Kopkowski. He was previously a vice president at auto supplier Dana Holding Corp.
Fisker said Monday that it will upgrade customer warranties because of the battery replacement. The new warranty will apply to existing and future 2012 models of the luxury Karma model, which costs about $100,000. Fisker said A123 will replace all affected battery modules and packs for the Karma.
Last month, privately held Fisker recalled the small number of 2012 Karmas it had already sold because of a problem with battery packs made by A123, said Fisker spokesman Roger Ormisher. A faulty hose on the battery pack led to potential coolant leaks.
Fisker has sold about 640 Karmas and 200 to 300 more are on car dealership lots, Ormisher said.
Orders from Fisker have a big impact on A123. Battery sales to Fisker accounted for about $40.7 million of A123's $159.1 million in total revenue in 2011, Wunderlich's O'Neill estimated. The battery maker lowered its full-year revenue outlook late in 2011 after Fisker cut orders for A123's battery packs.
Ormisher said Fisker has no plans to cut orders this year.
Shares of A123 Systems Inc. slid 21 cents, or 12 percent, to close at $1.49, and fell as low as $1.45 during the session. The Waltham, Mass., company went public two-and-a-half years ago at $13.50 per share.
The stock on Monday gave up all its gains from earlier this month, when A123 announced that it would supply Indian automaker Tata Motors with lithium ion battery packs for use in commercial vehicle hybrid electric systems.
General Motors Co. in August chose A123 to produce batteries for use in future electric vehicles. A123 isn't yet supplying batteries to either Tata or General Motors, O'Neill said.

A123 to spend $55M replacing battery equipment

Hybrid cars 101: How long should batteries last?

Owners complain that some hybrid-car batteries conk out early. What is the lifespan of a hybrid battery?

 Japanese automaker Honda found itself in a second US court case early this year over a batch of problematic hybrid-car batteries that customers say sabotaged their fuel efficiency by as much as 40 percent.

Like other hybrids, the Honda Civic Hybrid relies on a battery system that gives the gasoline engine an extra boost in efficiency. These energy cells recharge while driving, but lose capacity over time. Now a class action lawsuit alleges that Civic Hybrids from the years 2006 to 2008 had shoddy batteries that reduced their fuel economy from the promised 50 miles per gallon to 30 m.p.g. within just a few years.
How long should such a battery last? Hybrid owners already pay a premium for their fuel efficiency. Replacing the battery midway through the life of the vehicle would tack on an additional $2,000 to $4,000.
Fortunately for hybrid owners, the Civic's battery problems seem to be an anomaly.

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"What appears to be some sort of failure in Honda Civics has not been reported in the other models," says Bradley Berman, founder of the news and reviews site HybridCars.com. "I'm not saying that these batteries will last forever, but the general sense is that they will last for, quote, the lifetime of the vehicle."
Cinda Gobeille had to garage her Toyota Prius when the battery gave out after a healthy life of 10 years and 144,000 miles. The car looks great, she says. But without a new battery, which dealers say will cost up to $4,200, her hybrid simply won't turn on.
"It could get 50 miles per gallon on a good day," says Ms. Gobeille, a nurse case manager from Woonsocket, R.I. "When the battery was dying, it dropped down to probably 35 [m.p.g.]. It's a great little car. I really enjoyed my Prius, but this battery system is just too expensive to replace on such an old car."
Gobeille has held on to the dormant Prius while she investigates third-party batteries, which she says could cost $1,300.
In some cases, old hybrids show no signs of aging. Last year, Consumer Reports compared a 2002 Prius with 206,000 miles with the results that it had collected 10 years earlier on a nearly identical 2001 Prius that had only 2,000 miles. There was barely any difference in fuel efficiency. The near-mint 2001 model had logged 40.6 m.p.g., while the aging 2002 Prius averaged 40.4 m.p.g.
So why are hybrid batteries sprightly after a decade, while laptop batteries start wheezing within just a few years? The chemistry is different – but in some ways, humans are to blame.
"Generally, when you're charging your device battery, you're charging it to 100 percent," says Mr. Berman, "and you're depleting it to zero percent. Right? That is the worst thing you can do for the longevity of the battery."
Hybrids come with software that purposely stops the battery from charging once it hits about 80 percent of full capacity. Similarly, the battery will say it's empty when it falls to about 20 percent. The exact numbers are company secrets, but the point remains: By undertaxing their batteries, hybrids ensure longer life spans. (Some gadget gurus suggest a stricter "40/80" rule for laptops and phones. Of course, that limits the usefulness of a single charge in exchange for long-term gains.)

If hybrids do conk out early, most batteries come with an eight-year or 100,000-mile warranty.
Even as her Prius's efficiency slipped, "it always had good power," says Gobeille. She now drives a Hyundai Sonata Hybrid and says she plans to stick with hybrids – or maybe electrics – from now on.

Hybrid cars star of Albany Car Show

 Auto makers are revving up more energy-efficient engines at this year's Albany Car Show. Our Brandon Walker spoke with drivers who say amid rising gas prices, they're happy the auto industry is responding to signs of the times.

 By plugging a chord into what, essentially, is one big socket, your days of waiting in line at the pump are over.It's the new Nissan Leaf, powered by electricity, and sparking lots of attention even some skepticism.

"I'm still on the fence about it a little bit."
But that didn't stop Harold Felt from getting a lesson in how it works. His intrigue is driven by rising prices at the pump.
"I'm not ready to give up the gasoline just yet. At $6 per gallon, maybe," Felt said.
Not quite there yet. AAA reporting the average price for a gallon of Petrol at $3.78--even higher in the capital region.
"A lot of choice for consumers," said Deborah Dorman, president, Eastern New York Coalition of Automotive Retailers.
Auto makers are reacting to consumer demand for more energy efficient cars. That sign of the times on display at the Albany Car Show.

"On one charge it's like 106 miles, and combined if it were gas it would be 99 miles per gallon, which is just really really impressive," said Elias Skiff, as he looked at the Nissan Leaf.
From Toyota, Nissan, Chevrolet, and Ford.
More than 170 vehicles from 32 manufacturers are parked inside the Times Union Center.
"We've got two large cars and we're looking to downsize one of them," said Jeff Pangburn, who's testing a Chevy Malibu with his wife and daughter.
"Trying to get 30 [miles per gallon] on the highway at a minimum. Even the [Honda] CRV, the Honda is getting more now, the equinox. So it's good to see," he said.
And with customers looking to cut back on consumption costs the industry hopes to cash in. A vendor selling electric vehicle charging stations stopped passersby as they checked out cars.

"This is the new infrastructure that's going to have to be out there before people are going to start thinking and purchasing electric vehicles," said Mark Bomba, of Eco Sun and Power, a company that sells charging stations.
Which brings us back to Harold Felt, who's still interested, but won't make a purchase just yet.
"I just need to do a little more homework first," he said.

More hybrid, electric cars available to rent

Rental car companies and hotels are making it easier for travelers who want to help save the environment and not spend extra money on high gasoline prices.  

  Major car rental companies are increasingly adding electric cars to their already growing hybrid car fleets. And hotels are installing electric charging stations or giving electric and hybrid car drivers breaks on pricey parking fees.

Travelers have never had so many options for more fuel-efficient and environmentally friendly cars. And as pump prices rise, more travelers are taking advantage of them, rental car agencies and hotels say. The average national price of a gallon of regular was $3.76 on Friday, up 28 cents from a month ago, according to AAA.

"Overall, there is interest from our customers in alternative-fueled vehicles — and certainly the increase in gas prices increases consumer awareness and interest in learning more about fuel-efficient car rental options," says Lisa Martini, a spokeswoman for Enterprise Holdings, which also owns Alamo Rent A Car and National Car Rental.

What they'll learn is that they could end up having to use some of the money they save on gasoline to pay for renting the car. Most rental companies charge higher daily rates for hybrid or electric cars.

Indicative of the fuel-efficient rental options open to travelers:

•Avis Budget Group has added Chevy Volt electric cars to its fleet at New York's LaGuardia Airport as part of a pilot program. More broadly, the company offers Environmental Protection Agency SmartWay Certified green vehicles that earn high marks for how environmentally friendly they are as measured by air pollution and greenhouse gas emissions.

•Enterprise has Nissan Leaf and Chevy Volt electric cars at about 50 Enterprise Rent-A-Car sites and in its car-sharing program. Electric vehicles also are available at a few Alamo locations. With hybrid cars, the company's alternative fuel fleet surpasses 400.

•Hertz Rent-A-Car offers electric cars in New York, San Francisco and Washington, and in London, Switzerland and China. The company plans to add more cities this year and is also trying out a wireless charging station, in which you drive a car over a pad to get a charge.

Rental car agencies began experimenting with hybrids a few years ago but were slow to adopt electric cars because drivers were leery of them until recently, when charging stations became easier to find.

"As the infrastructure to support EV's continues to be developed, you'll see a lot of cities and towns and whatnot be more proactive in encouraging adoption among consumers," says Paula Rivera, a spokeswoman for Hertz.

Eco-friendly, financially smart 

Diana Bianco, a health policy consultant, recently rented her first electric car, a Nissan Leaf, for a stay at The Heathman Hotel in Portland, Ore. The hotel took care of parking and charging at an on-site station.

"My primary motive was to reduce pollution," Bianco says. "But if gas prices are going to continue to go up, it makes good, smart, economic sense to drive a hybrid or electric car, whether you're renting it or owning it."

In 2010, there were 400 electric and 274,500 hybrid cars sold in the United States, according to LMC Automotive, a forecasting firm. Last year, the number of electric cars sold jumped to 12,700. Just 268,000 hybrid cars were sold because the Japanese earthquake and tsunami shut down production, says Mike Omotoso, a senior manager at LMC.

By 2017, the firm is expecting 96,000 electric and 1.1 million hybrid cars to be sold, in part because tougher federal fuel economy standards will be in place. While that represents only 7% of all cars sold, it's still a significant increase.

It's no wonder that all Element hotels, a Starwood brand, have charging stations, as do many Starwood properties, including six in Hawaii, the state with the highest average gas price, $4.41. Marriott International has 45 electric vehicle charging stations at 22 properties. And most of Kimpton's 52 hotels have free or discounted parking for guests with hybrid cars.

"Green is a really good differentiation in the travel and hospitality industry," says Ron Cogan, editor and publisher of the Green Car Journal, a website that covers green vehicles and technology.

Costlier up front 

One deterrent to buying electric and hybrid cars is the price. Buyers generally have to pay $6,000 more than for conventional cars.

That means travelers looking to rent a car also have to pay a heftier daily rate. Rivera says Hertz charges about $3 to $5 more a day for the cars because renters have to reserve specific vehicles. "This is just to cover our operational cost for holding the car," she says.

At Enterprise, rentals range from $65 to $70 a day, slightly higher than comparable conventional cars. Martini says the price takes into account the vehicle's cost, demand and operational costs, such as maintaining the charging stations.

John Barrows, a spokesman for Avis Budget Group, acknowledges that the higher daily rates could offset savings from fewer gas expenses.

But, he says, whether travelers save any money depends on "the length of rental, miles driven, driving conditions, how the driver operates the vehicle, use or not of electronic toll collection services, etc."

Bert Martinez, a motivational speaker in Houston, recently paid about $220 to rent an electric car for two days. "There was no savings there," he says.

But he didn't mind, as he's planning to buy an electric car and rents when he travels to test them out. "I think it's worth the investment," he says. "I think they're good fun."