GM Throws A123 From a Moving (Hybrid) Car

I'd missed this news from last week's North American International Auto Show, until an eagle-eyed reader called my attention to it: GM has chosen Korean-made batteries from LG Chem, instead of batteries from A123 Systems of Watertown, Mass., for the first generation of its Chevy Volt plug-in hybrid.

From the AP:

LG Chem CEO Peter Kim said the company may eventually build cells in Michigan, and it anticipates that its U.S. subsidiary, Compact Power Inc., will add to its 100-person work force in Troy, Mich.

...{Volt vehicle line director Tony] Posawatz said GM chose LG Chem because of its flat-cell design that dissipates heat better and stores more energy than competitors' cylinder-shaped cells.
The competition from A123 Systems Inc. of Watertown, Mass., was very capable, Posawatz said, but "one has to be the lead."

The Christian Science Monitor offers more detail on the decision, in this Q&A with Robert Kruse, a GM executive director for hybrid vehicles. Kruse says:

"...We selected LG as the cell source for Gen-one Volt; and we are also very intrigued and attracted to some of what A123 has to offer and are continuing to do advanced development with A123 for future applications – just not Gen-one Volt.

The Oakland Business Review has an interesting quote from GM vice chairman Robert Lutz:

"A123 is still sort of a startup, they're still ramping up, and A123 has been specializing mostly in ...cylindrical cells, which are good with power tools and stuff. What we need here is prismatic, which is flat cells. And LG Chem is just farther along," he said.

John Dodge of Design News asks some interesting questions:

– GM may have bought itself a problem, too. It has taxpayer loans now and despite all its plans to build battery labs and plants in Michigan and around the world, it can’t escape that fact it selected a Korean and not an American company to make the key component for its batteries. Could this be a problem for the incoming president whose number one priority is getting Americans back to work?

– What did A-123 know when did they know it? Could its executives have been thinking on Jan. 7 [when they applied for a $1.84 billion government loan to build a new plant] that it was going to be GM’s key battery partner? Was the announcement a Hail Mary pass to convince GM that it would have the manufacturing prowess and capability to operate in the giant auto maker’s back yard? Did GM chose LG Chem in the 11th hour?

Ecogeek has more analysis.

No comments in the media from A123, which filed for an IPO last August so the company is still stuck in its quiet period.

Think that public offering will be happening soon?

Paul English, Kayak, Sequoia, and the Triple-Digit Club

My most recent Globe column focused on what I call the "Triple Digit Club" -- companies that have raised $100 million or more in venture capital funding.

The club includes Boston-area companies like E Ink, Kayak, A123 Systems, GreatPoint Energy, and Luminus Devices. (Kayak is the current club president, having raised $223 million.)

My favorite tidbit from the column is that Sequoia, one of the investors behind Kayak, apparently used them at the famous "RIP Good Times" presentation in October as an example of a company that already operates lean and mean. From the column:

The entire start-up world...took notice last month when several partners of Sequoia Capital, the venture firm that funded companies like Google, PayPal, and Electronic Arts, called a meeting to warn its companies about the coming recession. The text on the opening slide? "R.I.P. Good Times." Spending cuts, the firm advised, are a must, and acquirers will gravitate to profitable companies.

Sequoia, as it happens, is an investor in Kayak (A123Systems, too). According to [Kayak co-founder Paul] English, people who were at Sequoia's cautionary meeting say that partner Michael Moritz mentioned Kayak several times.

"They were talking about us as a company with a lean profile," he says. "In their portfolio, we are the skinniest as far as costs." That frugal posture will be an asset if even gloomier times are ahead.

The video features English talking about his approach to hiring and firing engineers.

Delivered: A123's IPO Papers Arrive at the SEC

InnoEco told you back in April that an IPO for A123 Systems was on the way... and I actually assumed that since three months had elapsed with no news, the company had put it on ice, waiting for market conditions to improve.

But they just filed this morning, likely hoping to take advantage of the public interest in cleantech, and anything (like the company's plug-in hybrid car conversion business) that can combat high gas prices. A graphic included in the company's S-1 filing says, "Our world is warming up... to a new generation of energy storage solutions enabled by nanotechnology."

(I just checked... no, Al Gore is not on their board of directors, despite that "Inconvenient Truth"-style messaging.)

Some key info from the filing:

We design, develop, manufacture and sell advanced, rechargeable lithium-ion batteries and battery systems. Our batteries and battery systems provide a combination of power, safety and life that we believe no other commercially available battery provides. We believe that lithium-ion batteries will play an increasingly important role in facilitating a shift toward cleaner forms of energy. Using our innovative approach to materials science and battery engineering and our systems integration and manufacturing capabilities, we have developed a broad family of high-power, lithium-ion batteries and battery systems. This family of products, combined with our strategic partner relationships in the transportation, electric grid services and portable power markets, position us well to address these markets for next-generation energy storage solutions.

In our largest target market, the transportation industry, we are currently working with major North American and European automotive manufacturers and major automotive, or tier 1, suppliers to develop batteries and battery systems for hybrid electric vehicles, or HEVs, plug-in hybrid electric vehicles, or PHEVs, and electric vehicles, or EVs. For example, we are engaged in design and development efforts with several passenger vehicle manufacturers and tier 1 suppliers, including General Motors Corporation, or General Motors, and Think Global AS, or Think Global, relating to the design and development of batteries and battery systems for eleven passenger vehicle power train programs that can be applied to 19 vehicle models. We estimate that the number of HEV, PHEV and EV models with an annual production run of at least 20,000 vehicles will grow from ten models in 2008 to over 100 models in 2012. The advanced battery market for HEVs, PHEVs and EVs is currently a $700 million market. We estimate this market could grow to at least $5 billion by 2012.

...We began selling our first products commercially in the first quarter of 2006. We have over 1,100 employees worldwide. Since our inception through March 31, 2008, we have generated $87.1 million in revenue, consisting of $72.6 million from battery and battery system sales and $14.5 million from research and development services. Our revenue has grown from $34.3 million for the year ended December 31, 2006 to $41.3 million for the year ended December 31, 2007, and from $8.1 million for the three months ended March 31, 2007 to $10.3 million for the three months ended March 31, 2008.

Like a lot of start-ups, they're still losing money: $31 million in 2007, up from $15.8 million in 2006. Revenues were $41.3 million last year, up from $34.3 in 2006.

[ Update: Dan Primack has a post noting that A123 also disclosed in the filing that they raised an additional $102 million this year, bringing their total funding to $230 million. ]

As I'd reported earlier, the biggest A123 shareholders to this point are North Bridge Venture Partners (13.6 percent), Desh Deshpande (12.7 percent), GE (10.4 percent), and Qualcomm and Motorola, both with about eight percent. CEO David Vieau holds 2.4 percent of the stock. No word on how much founders Yet-Ming Chiang and Ric Fulop hold. Another beneficiary of a successful IPO will be MIT, which licensed some of the original IP developed there to A123.

In June, I wrote a column about A123's early history -- and produced a video about the company.

How excited are people about this IPO? I've gotten about a dozen e-mails over the last three months asking me whether I knew when A123 would file...

Gov. Patrick: Let's Crack the Energy Crisis

Gov. Deval Patrick writes about the state's new energy law in today's Globe:

Our vision capitalizes on the Commonwealth's natural advantages in technology and entrepreneurship to combat rising energy costs and satisfy the need for new, clean, affordable ways to meet energy needs - creating a whole new industry along the way.

Later, he mentions a few companies by name:

...A123 Systems in Watertown, which is developing batteries for plug-in hybrid cars to enable them to get up to 150 miles per gallon; Evergreen Solar, which is set to open a new solar-panel manufacturing facility in Devens, encouraged in part by the state's new rebate program for solar electricity installations, Commonwealth Solar; Mascoma in Cambridge and Sun Ethanol in Amherst, two leaders in cellulosic biofuel, the non-petroleum, non-food-based fuel of the future, which will get a boost from a gas-tax exemption now pending in the Legislature, the first of its kind in the country; and GreatPoint Energy, a Cambridge firm now demonstrating its innovative technology for turning coal and biomass into clean-burning natural gas at the Brayton Point power plant in Somerset.

Most recent Globe column: The A123 Systems Back-Story

My most recent Globe column delves into the back-story of A123 Systems, the Watertown battery company that is smack in the middle of the plug-in hybrid frenzy, and apparently preparing to go public (though one might ask what's taking them so long with the S-1?)

Here's the opening:

The third time that Ric Fulop asked Howard Anderson to invest in one of his start-ups, there was no good reason for Anderson to say yes. Fulop was forming a company that would reinvent the battery, but Anderson, founder of the Boston forecasting firm the Yankee Group, had already lost millions by investing in Fulop's previous ventures.
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Fulop had come to the United States from Venezuela, where he'd started two companies while still in his teens, and then dropped out of Babson College to dive head-first into the entrepreneurial mosh pit of the late 1990s.

He started a company to stream software to PCs. He started a company to make equipment that would increase the bandwidth of high-speed Internet connections. A third start-up, Broadband2Wireless, aimed to use a network of antennas on rooftops to bring a zippier Internet access alternative to big cities.

The three companies, which together sucked up more than $100 million in funding, all failed. Broadband2Wireless, which filed for Chapter 11 protection about a year after its founding, acquired the nickname "Broadband2Cashless."

I wrote about Broadband2Wireless here, in 2001. And I wrote about Anderson's exit from the VC world here, in 2005. (Can't seem to find the column that chronicled the death of B2W, but this one mentions the CEO's resignation.)

The weekly video for the column is here:

The A123 Systems IPO: Signed, Sealed ... But Not Yet Delivered

Two unnamed sources with close ties to A123 Systems, the Watertown maker of next-gen lithium ion batteries for Black and Decker cordless tools and plug-in hybrid cars, tell me that the company's IPO filing is essentially complete. Once the first quarter numbers are finalized, an S-1 is likely to arrive in the SEC's inbox sometime in the next month or so. The offering could value the company at more than $1 billion. Road show is planned for September; Goldman, JP Morgan, and Merrill are underwriting, I'm told.

A123 Systems has raised more than $150 million since it was founded in 2001. Among the biggest winners from a successful IPO would be North Bridge Venture Partners and Sycamore Networks chairman Desh Deshpande. (North Bridge has a cool video case study on A123.) Sequoia Capital and General Electric are also investors.

Will Wall Street have an appetite for a battery IPO in September? We'll see...

A123 Systems' PR rep, Keith Watson, says, "The company can't comment on anything related to an IPO."

(In the photo is George W. Bush with A123 CEO David Vieau, standing next to a plug-in hybrid Prius that A123's Hymotion division converted. White House photo by Paul Morse.)