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A123 Surges Most Since 2009 on GM Battery Pack Contract

A123 Systems Inc., a maker of batteries for electric vehicles, climbed the most in almost two years after getting a contract to supply packs for General Motors Co.

A123 advanced $1.43, or 45 percent, to $4.60 at 4 p.m. in Nasdaq Stock Market composite trading, the most since September 2009.

A123 will supply lithium-ion cells and electronic parts to Detroit-based GM for specific vehicles that will be announced later, the automaker said today in a statement. Kevin Kelly, a GM spokesman, declined to provide financial terms of the contract or production figures in a phone interview.

“We expect the volumes to be probably starting in the several thousands and potentially going up to tens of thousands of units per year,” Jason Forcier, vice president of A123’s automotive group, said in a phone interview. “It’s a major platform, a major project win for us.”

A123 will finish development and engineering of the packs for GM at the end of 2012, Forcier said. Vehicle production can start some time after that, he said.

The contract with GM is an extension of an existing agreement that Waltham, Massachusetts-based A123 had with the largest U.S. automaker, according to the statement.

GM rose $1.89, or 7.9 percent, to $25.81 at 4 p.m. in New York Stock Exchange composite trading. The automaker’s shares, which are still down 30 percent this year, had their biggest one-day gain since GM’s initial public offering in November.

Fuel Standards

New U.S. fuel-economy standards that take effect in 2017 and call on automakers to improve efficiency in cars by 5 percent a year and trucks by 3.5 percent most years through 2025 will drive demand for A123’s batteries in the longer term, Forcier said.

A123 has reported losses in every quarter since 2008 and went public in September 2009. The battery maker’s second-quarter loss widened to $55.4 million, from $34.2 million a year earlier, according to an Aug. 4 statement. Sales increased 61 percent to $36.4 million in the three months ending June 30.

Chief Executive Officer David Vieau expects to more than double revenue for the full year from 2010 as A123 ships more battery packs to customers such as luxury plug-in hybrid-car maker Fisker Automotive Inc. Other customers include Bayerische Motoren Werke AG, Daimler AG, and Shanghai Automotive Industry Corp., according to a regulatory filing.

Dan Galves, a Deutsche Bank AG analyst, said in an Aug. 5 research note that A123 was likely to announce contracts from BMW and a major North American manufacturer in the second half of the year. Galves, who is based in New York, has a “buy” rating on the shares and says they may rise to $12.

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