How did A123, an American maker of lithium-ion batteries, go broke?

A123 is the world's leading lithium battery producers. It is founded by five people including MIT and Cornell researchers in 2001. Start-up capital is $100000. The total number of employees is 250 people in 2007. The total asset is more than $100 million. NASDAQ came into the market in September 2009, and raised $380 million. There are more than 2000 employees all over the world in 2012, among whom Chinese employees is 770. It is widely recognized as the world's most high-quality automotive lithium battery manufacturers.

Beijing time ten o 'clock last night, A123 bankruptcy agreement is done.

A123's main products are car batteries.

What is the principle of lithium battery? A big lithium battery is actually the tiny battery series, to A123 lithium iron phosphate battery is the main product, for example, a positive electrode is a small battery, electrical knowledge of back in high school, in the process of the series is not allowed any malfunctioning, so the key technology of battery is to guarantee the stability of small battery performance and parameters.A123 is a lot of it can bring a small battery manufacturing into uniform nanoscale particles, greatly increased in small battery total quantity under the condition of maintaining the stability of the whole.A123 technology how lead? The stability of the same size, same, A123 the number of small batteries in the battery is generally 100 times of lithium-ion batteries.

Have technical background, MIT has verified by practice and technological achievements, A123's popularity is almost predictable, it attracts a large number of investors, including sequoia vc, procter & gamble and MOTOROLA. Even in the U.S. department of energy, lively and it signed a $15 million dollars in new energy development contract.

At this point, A123 landslide is without question the leading battery technology advantage, however, your manager can see the last sentence in the background information, Beijing time ten o 'clock last night, A123 sought bankruptcy protection signed documents, so what, makes such a star company, finally to the point of bankruptcy?

A123 problems appeared in where?

First is the environment that the risk of new ventures have: due to technical limitations, new energy products to large-scale, commercial applications, costly risk is huge, and A123 company too avant-garde technology to some extent even a drag on its hind legs, A123 market at present is mainly manufacture car batteries, however, the current economic situation determines that fewer and fewer people are willing to to the concept of new energy for the same car to pay a sum of money, the performance of the A123 is expensive luxury representative of electric cars, A123 do is the world's best quality automotive batteries, but also can be called the world's lowest price vehicle batteries, the main buyers of he is with luxury cars go out fisker, performance parameters of the same cell, A123 just because their products are more stable, more cool, more small, will be to lithium batteries commonly 2 ~ 3 times the price to sell, a brilliant time this way in the world economy is likely to be useful, but 08 years later, this won't work.

Is not only economic environment, the development of the electric car industry environment also nots allow to A123 cast, a study said, the electric car industry in full swing also need 5 ~ 8 years, before that, last year gm's VOLT electric car brand is shut down because of the demand is less than 10000.

The A123 company is committed to the development of other, more advanced business direction of grid cell, and automobile starting batteries, these markets are still in the prototype, the profit out of reach.

The second cause of A123 failure is that it is a spoiled child:

Beautiful scene on the surface of the company has a lot of policy reasons, the United States as the world's most famous market economy countries, but also escaped the fate of the policy guidance "industry" as the Obama administration's new energy legislation, A123 accepted the government directly allocated nearly $250 million, the state's indirect subsidies to $140 million. The U.S. government has strict rules, these funds must be used to expand, building facilities in order to improve employment.A123 use these money desperately expand production capacity, a large number of recruiting new employees, a large number of construction of production line, thus caused the A123 illusion of vitality. But in fact, A123 the excess production capacity has never been fully used, in other words, the money made the A123 hit swollen face filling fat. Last year. Last year, A123 in order to complete the big order signed and fisker, rapid expansion of production capacity, however, the expansion of production is a decline in the quality, in March this year, A123 admits it produced some defective batteries, have to cost $55 million recalled batteries. At the same time, because of the economic environment, fiske was not able to make it new products into the market in time, it is reduced to A123 battery orders, A123 pay a lot of damages on the one hand, on the one hand, did you get the expected sales, factory also forced to cut jobs, and had to shut down part of the production line. This is also for today's bankruptcy the seeds.

The third reason, peripheral environment, the threat of worldwide, countries with full lithium electricity industry chain only China, South Korea and Japan, under the condition of the traditional application fields tend to be saturated, China, Japan and South Korea lithium electricity enterprises are shifted to a target power battery field. At present, China, Japan and South Korea of lithium battery companies are not only dominated the domestic lithium ion power battery the market, at the same time will also be extended to European and American traditional automobile manufacturing power. While in the United States government, under the guide of the American automakers in the United States, such as A123 battery maker, but if the only reason is the government support companies sell products, means that once the enterprise out of the door from the shelter, there's no competitiveness in the global market. Not external, internal and weak because the new energy automobile market performance, it will directly affect the A123 company business.

The last and most important, we look at the company's financial statements:

A123's revenue growth is a beautiful rose curve. From $34.35 million in 2006, 91.05 million in 20 09 to nearly $160 million in 2011, the average annual growth rate of 30~40% is very impressive. The problem of A123 is that revenue is growing rapidly, but the cost of spending growth is faster. 34 million brought a loss of 16 million operating income in 2006, sales income is 97 million but sales 91 million in 2009. In the same year, the loss is up to 86.6 million, 10 years of sales is less than $100 million, and the loss is $150 million. View over the past five years, the cost of A123 has never stopped growing. In other words, the company has been at a loss, and never makes money. By high government subsidies and heavy borrowing to maintain cash flow of the company is at stake, and yesterday, a group of bond payment date coming became the pioneers of the battery the last straw.

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