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A123 Falls on ‘Significant’ Losses to Replace Batteries

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May 31 (Bloomberg) -- A123 Systems Inc., a U.S. maker of lithium-ion batteries for electric cars, fell the most in more than two weeks after saying it expects “significant” losses and is pursuing options to raise cash.

A123, based in Waltham, Massachusetts, fell 11 percent to $1.02 at the close in New York, the most since May 14.

The company is replacing defective battery modules and packs at a cost of $51.6 million and taking an inventory charge of $15.2 million. It expects to incur “significant net losses and negative operating cash flows over the next several quarters,” it said yesterday in a filing.

The expected losses raise “substantial doubt on the company’s ability to continue as a going concern,” it said in the filing, repeating a May 15 disclosure. The company is talking to potential partners and evaluating other strategic options.

This may make it difficult for A123 to attract customers if auto manufacturers are concerned the company won’t be around to honor warranties, Theodore O’Neill, an analyst at Wunderlich Securities Inc. in New York, said today in an interview. The company’s financial condition may also deter potential backers.

“Can these guys raise money?” said O’Neill. “Sure, hope springs eternal for some investors, but it will certainly be a valuation that disappoints existing shareholders.”

A123’s shares have fallen 32 percent since it recalled on March 26 batteries that made a Fisker Automotive Inc. car shut down in a Consumer Reports test.

To contact the reporter on this story: Ehren Goossens in New York at egoossens1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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