Bankrupt A123 Looks To Break Fisker Battery Contract, Threatens Karma Production

4 years ago by Jay Cole 12

Not The Best Day For Henrik Fisker Or His Karma

A few weeks ago, and unhappy with a $450 million dollar takeover deal earlier arranged with Chinese parts giant Wanxiang, US battery maker A123  filed for bankruptcy protection.

Through the bankruptcy progress JCI – Johnson Controls Inc., said they would spend $125 million to buy all of A123 automotive business, and related technologies and contracts.

Fisker Karma, Powered by 20 kWh Lithium Battery From A123

However, since the bankruptcy was announced there has been some legal wrangling between A123, Wianxiang, JCI, and now Fisker over the eventual fate of the company.  Specifically, its contracts, and how A123 would be divided up (and by whom) going forward.

Apparently A123 (and most likely JCI) would rather not have anything to do with Fisker, and supplying their extended range Karma electric sedan under its current contract, as A123 has asked a bankruptcy judge to officially void the contract.  Under Chapter 11 banktuptcy rules, any below market contracts can be vacated.

And Fisker is not happy.

For starters, there is the matter that sent A123 spiralling into bankruptcy in the first place.  2,000 defective battery packs.  Fisker told the court that it expects the bill on those replacements to total $52 million dollars in the end, and they would rather not foot any of that payout.

Future A123 Prismatic Battery Modules For Fisker Karma At Heart Of The Problem

But perhaps more importantly, Fisker says the voiding of the contract would threaten their “ongoing business” because the company as “no near term supplier” for the Karma.

Additionally, the company says they would lose a  “contract rejection damage claim in excess of $63 million” if A123 is released from their committments.

Fisker postulates that A123 looks to void the deal in order to give JCI leverage over the company in future dealings.

According to Fisker lawyers, “…as both A123 and JCI know, Fisker has no near-term alternative supplier of the A123 Batteries used for the Karma program in the amounts that Fisker requires…Consequently, the rejection of the Fisker contract as of the petition date appears to be solely for the purpose of providing JCI with significant negotiating leverage.”

 

 

A123 says the current contract with Fisker (that makes up $1 of every $4 A123 records in revenue)  is “burdensome” and that the contract as it stands is below fair market value.

The Fisker Karma currently is powered by a system and 20 kWh battery (made from 300+ individual Li-Ion batteries) provided by A123.

No word on any supplier issues between A123 and General Motors on the upcoming Spark EV, but it is thought that JCI highly values continuing the A123 contract (and relationship) with General Motors.

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12 responses to "Bankrupt A123 Looks To Break Fisker Battery Contract, Threatens Karma Production"

  1. backstroke says:

    Most sane people find it difficult to believe that Fisker hadn’t seen the writing on the wall and not put contingency plans in place.

    1. Bonaire says:

      They speculated weeks ago with the new CEO in place that “we are reviewing options” in terms of battery suppliers. They basically raised the option first of looking for other suppliers. You don’t single-source something as critical as the battery pack for an EV. Or maybe you do when you are small-enough company without contingency plans.

      There must be legal wording in the current contrat to stipulate damages to Fisker should A123 fall out of contract, so they must be trying to avoid that through BK judgements to void the contract.

  2. Dave R says:

    It looks to me that A123 is looking to weasel out of having to pay for all the defective packs they sold Fisker…

    1. vdiv says:

      There is a lot of weaseling in this mess. It looks to me that JCI broke up a perfectly legitimately setup bridge loan that Wanxiang was extending to A123, by using the whole Chinese conspiracy as a political lever. Now JCI wants the pieces dirt-cheap.

      Here’s the kicker, ready? A little bird told me that Bain Capital is a major investor in JCI…

      I’ve tried to verify this and am not 100% sure it is true. Brookside Capital is the public equity subsidiary of Bain, yet that doesn’t mean that their investments are a public knowledge, but Bain’s private equity positions are public (go figure):

      http://www.baincapitalprivateequity.com/about/regions/north-america/related-investments

      There are things going on that the general populace is simply unaware of. Dark and dangerous things and it is no longer Halloween.

    2. Herm says:

      Very perceptive Dave

  3. KenZ says:

    “A123 says the current contract with Fisker (that makes up $1 of every $4 A123 records in revenue) is “burdensome” and that the contract as it stands is below fair market value.”

    Jerks. _THEY_ (A123) signed the contract for delivering the batteries to Fisker. No one held a gun to their head to give Fisker that pricing. And now they want to get out via bankruptcy…. proving that they were poorly run all along.

  4. indyflick says:

    Additionally Fisker is dealing with the issue of the 16 Karmas that caught fire in the Sandy flood. Not a good week at all for Fisker.

  5. Bobafet says:

    Interesting thoughts on the link from JCI to Bain Capital (and Romney whose had it out for Fisker for over a year).

    However, cars catching fire in the Sandy flood is not a Fisker-specific issue — Jalopnik just made it look that way. Over 300 car fires occurred across NY and NJ, including three Toyota Prius fires in the same lot as the Fiskers. And it may have just been one Fisker spread fire to the dozen or so parked close by. Fiskers parked farther away were unscathed. Or could have been a hoodlum dancing in the storm with gasoline 🙂

  6. Shawn marshall says:

    Amazing what lengths Greeniacs will go to disparage without a hint of evidence. Fisker certainly doesn’t deserve taxpayer money from a nation that is 16,000,000,000,000 in the hole. Or say it another way that’s 16,000 BILLION dollars.
    Please feel free to send them your own money to your hearts’ content

    1. kdawg says:

      What’s a greeniac?

      1. Erock says:

        hmmm it sounds like a clever play on words for some one who may care about the environment we live in, probably made up by a numberholic!(person who is grossly obsessed with the amount of national debt the U.S. has acquired)

  7. Erock says:

    Fisker has bad karma !ever since he(Fisker) tried to steal the design of the model S from Tesla, they sued him,he won but now is losing . Bloomberg Risk Tsakers, Elon Musk, one hour episode ..find it watch it! cheers