Celebrity scientists suffer the same bumps as the high-tech hoi polloi

Sports car companies, fashion designers, Silicon Valley startups — these are the natural stuff of celebrity businesses. But battery-makers? Not so much — unless you are A123 Systems, in which case, with your MIT superstars, you have scaled the high-tech world, and ended up in the rarefied air. But such company is transitory — high-flyers ...

Mandel Ngan  AFP/Getty Images
Mandel Ngan AFP/Getty Images
Mandel Ngan AFP/Getty Images

Sports car companies, fashion designers, Silicon Valley startups -- these are the natural stuff of celebrity businesses. But battery-makers? Not so much -- unless you are A123 Systems, in which case, with your MIT superstars, you have scaled the high-tech world, and ended up in the rarefied air. But such company is transitory -- high-flyers come and go (Mark Zuckerberg: take note). For Boston-based A123, which went IPO a little over two years ago at a share price of $13.50, this week made a filing with the Securities and Exchange Commission that it may not survive, and sold today as low as a humbling 87 cents a share. (pictured above, better days: At the White House in 2007, actor Rob Lowe climbs into a car fitted with an A123 battery.) 

A123's straits are notable for what they say about the global advanced battery business. If scientists somewhere in the world -- China, Japan, South Korea, the United States are all in this technological contest -- can create a big leap in battery capability, they could overturn energy and geopolitical presumptions. Companies and countries relying on the income stream of fossil fuels would be at once undermined. New companies and industries would rise to importance, and geopolitical influence could shift away from the Middle East.

But, quite apart from the issue of whose technology can or should prevail, the industry consensus is grim: Almost all current advanced battery and electrified-car companies are suffering the downside of being first-movers. They are far early into the market, which is fine for those with deep pockets -- after all, this is a normal part of the new product cycle (think cell phones and flat-screen TVs). But most start-ups do not have that luxury. Apart from Asian companies that make consumer batteries such as the AA, and the Toyota Prius, battery and car company products are too expensive, generally not consumer-ready, and have met slow sales.

Sports car companies, fashion designers, Silicon Valley startups — these are the natural stuff of celebrity businesses. But battery-makers? Not so much — unless you are A123 Systems, in which case, with your MIT superstars, you have scaled the high-tech world, and ended up in the rarefied air. But such company is transitory — high-flyers come and go (Mark Zuckerberg: take note). For Boston-based A123, which went IPO a little over two years ago at a share price of $13.50, this week made a filing with the Securities and Exchange Commission that it may not survive, and sold today as low as a humbling 87 cents a share. (pictured above, better days: At the White House in 2007, actor Rob Lowe climbs into a car fitted with an A123 battery.) 

A123’s straits are notable for what they say about the global advanced battery business. If scientists somewhere in the world — China, Japan, South Korea, the United States are all in this technological contest — can create a big leap in battery capability, they could overturn energy and geopolitical presumptions. Companies and countries relying on the income stream of fossil fuels would be at once undermined. New companies and industries would rise to importance, and geopolitical influence could shift away from the Middle East.

But, quite apart from the issue of whose technology can or should prevail, the industry consensus is grim: Almost all current advanced battery and electrified-car companies are suffering the downside of being first-movers. They are far early into the market, which is fine for those with deep pockets — after all, this is a normal part of the new product cycle (think cell phones and flat-screen TVs). But most start-ups do not have that luxury. Apart from Asian companies that make consumer batteries such as the AA, and the Toyota Prius, battery and car company products are too expensive, generally not consumer-ready, and have met slow sales.

A123 was started in 2001 by MIT professor Yet-Ming Chiang and Bart Riley, both of them coming from American Superconductor, which Chiang co-founded. For those paying attention, the company became synonymous with the notion of a new battery-driven age. Starting in 2006, it began to rack up joint venture contracts with companies including General Electric, Chrysler and Shanghai Automotive. In 2009, it was awarded a $249 million matching grant by the U.S. Department of Energy as part of the Obama Administration’s effort to jump-start a U.S. battery-making industry.

But in March, the company suffered a setback when its batteries were responsible for the aborted rollout of a plug-in hybrid vehicle by one of its key customers, Fisker Automotive. A123 had to recall its lithium-ion car batteries, costing it $66.8 million. This week, the company said it lost $125 million in the first quarter of the year. In its SEC filing Tuesday, the company said its revolving line of credit has terminated. It said it is hoping to raise $50 million by selling bonds by tomorrow. But A123 added:

There is no assurance that the company will be able to obtain such financing on favorable terms, if at all, or to successfully further reduce costs in such a way that would continue to allow the company to operate its business.

The statement appears to be aimed at legal damage control in case its finances go entirely south. It does not sound its own death knell, nor that of the battery and electric-car age — not for the U.S., nor for any of the Asian contestants. The trick will be who can survive this valley of death.

<p> Steve LeVine is a contributing editor at Foreign Policy, a Schwartz Fellow at the New America Foundation, and author of The Oil and the Glory. </p>

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