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Fisker Automotive files $90M claim for A123 battery contract
Government-backed luxury carmaker Fisker Automotive has bought thousands of batteries from A123 Systems under an exclusive supply deal, but now the auto company may have to look for another power source for its high-end, plug-in hybrid Karma vehicles — and at a hefty cost.
With the bankruptcy of U.S.-based A123 and questions about its battery supply contract, Fisker said it could expect more than $90 million in added costs to purchase batteries from suppliers other than A123, according to court records.
The expenditures have increased as the California-based automaker reportedly seeks outside investors or buyers, still owes U.S. taxpayers for much of the nearly $200 million it has borrowed from the Department of Energy.
A123 has had its own financial troubles. The battery maker went bankrupt last year after receiving more than $120 million in federal grant money from the Energy Department, but it recently won approval from a judge and the U.S. government to be purchased by a Chinese competitor, Wanxiang America Corp.
But by the time A123 went bankrupt last year, Fisker said it had purchased only about 2,600 batteries while estimating it will need another 15,000. Fisker attorneys said the search for other battery suppliers won’t be cheap. The company estimated an additional cost of $6,080 per battery, with overall costs totaling $91.2 million.
The numbers provide more detail to the gloomy financial picture Fisker attorneys painted in a separate court filing last year, when they predicted that the automaker would be “severely disrupted and harmed” if the supply deal faltered.
“Consequently, the rejection of the Fisker contract represents an immediate threat of significant disruption and harm to Fisker’s business, with a corresponding negative impact on Fisker’s lenders, suppliers, customers and investors,” attorneys wrote in a filing.
Before the takeover by Wanxiang, attorneys for A123 sought to reject the Fisker battery supply deal, among other company contracts, arguing in court papers that many of the arrangements were below market.
Facing a potential cash shortage, Fisker has been busy looking for outside investors or buyers. Citing sources familiar with the talks, Reuters reported that China’s Zhejiang Geely Holding Corp. was a favorite to secure a majority stake in Fisker.
“The company has received detailed proposals from multiple parties in different continents which are now being evaluated by the company and its advisers,” Fisker spokesman Roger Ormisher told Reuters. Bloomberg also reported that Dongfeng Motor Group, also of China, is competing for a majority share in Fisker.
Reached by phone Tuesday, Mr. Ormisher declined to comment on the company’s claim in the A123 case beyond what Fisker attorneys outlined in their filing, which included a more than 50-page copy of the battery supply contract.
Fisker, which recently hired Chicago turnaround company Huron Consulting Group, was awarded a Department of Energy loan for more than a half-billion dollars, but it drew down less than half of that money.
Energy Department officials ultimately froze the funding because of what they called missed milestones. Part of the company’s loan was supposed to start production at a facility in Delaware.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
About the Author
Jim McElhatton is an investigative reporter for The Washington Times. He can be reached at email@example.com.
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