A123 cuts jobs at battery plant touted by White House

Tue Nov 29, 2011 1:47pm EST

Related Topics

* A123 cuts 350 temporary, staff workers in Michigan

* Battery maker heralded by White House for job record

* Job cuts prompted by reduced orders from Fisker

* A123 shares up 8.6 percent

By Kevin Krolicki

Nov 29 (Reuters) - A123 Systems has cut 35 percent of the workers at two Michigan plants that supply lithium-ion batteries for electric vehicles in response to a reduction in orders from major customer Fisker Automotive.

A123 cut about 225 full-time workers on temporary contracts in early November and laid off another 125 staff workers last week, company officials said on Tuesday.

A123 had employed about 1,000 workers in Michigan, a hiring record over just two years that the Obama administration has heralded as evidence of its success in creating green jobs with government funding.

The company, which developed as a startup at the Massachusetts Institute of Technology, received a $249 million grant from the Department of Energy to fund battery production in Michigan.

The state of Michigan gave the company another $125 million to offset the cost of setting up a battery plant in suburban Detroit.

That plant in Livonia, Michigan, had been running three shifts of battery production, but it cut output to a single shift after Fisker reduced its orders, said Jason Forcier, who heads A123's automotive business.

"This is an unfortunate blip in what has been a strong record in hiring people," Forcier said.

The workers are not represented by a union.

A123 spokesman Dan Borgasano said the company expected Fisker's orders to pick up again starting in the second quarter of 2012.

"We expect that this will be a temporary reduction in workforce that will last six months or less," Borgasano said.

Fisker, which builds the $96,000 plug-in Karma, has received $529 million in loans from the Department of Energy.

Delays in rolling out Fisker's plug-in hybrid have increased scrutiny over the fortunes of the fledgling automaker, which delivered its first Karma to actor Leonardo DiCaprio over the summer.

Fisker had long said it planned to sell 15,000 Karmas in 2012, but a spokesman said earlier this month that the company had lowered the target to between 10,000 and 12,000.

A123 is using a lower estimate of production of about 5,000 to 7,000 Karmas in 2012 in planning its own business, based on more conservative estimates by outside forecasting firms, Forcier said.

A123 has a stake in Fisker after investing $23 million in the startup. Fisker has raised funding from investors that include venture capital firm Kleiner Perkins, the Qatar Investment Authority and Advanced Equities.

A123 has also taken steps to cut orders for battery materials from suppliers after the reduced orders from Fisker, spokesman Borgasano said.

The company operates a second supply facility in Romulus, Michigan, also near Detroit.

The Livonia plant was described as the largest lithium-ion factory in North America when it opened in September 2010 with a ribbon-cutting ceremony attended by U.S. Energy Secretary Steven Chu as well as U.S. Senators Debbie Stabenow and Carl Levin from Michigan. President Obama called in for the event.

At the time, the White House said A123 planned to employ 3,000 workers at its Livonia and Romulus plants.

In a return visit to the plant in July, Chu called it a "a great example of how we are working with industries to create jobs, strengthen our manufacturing industry and help our auto companies compete in the global market."

The remaining shift at A123's Livonia plant is building batteries for three truck companies, Navistar , Smith Electric Vehicles and Daimler AG .

A123 has also won the contract to supply General Motors Co with batteries for an all-electric version of the Chevrolet Spark minicar set for introduction in 2013.

The company has also been working with Fisker on a battery for the Nina, a second, lower-cost model that the automaker plans to sell.

"We fully anticipate to be awarded that program," Forcier said.

Shares of A123 were up 8.6 percent at $2.28 in afternoon trading. The stock has fallen by 76 percent since the start of the year.

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