Re: A123 Having Financial Trouble
The costs are a lot higher than they appear to be, in circumstance that like that. One, the cells have to actually be replaced meaning it cost you double just to keep your product in those customers' products - double the total business expense (materials, labor, utilities, overhead, etc). Then, you have to ship the bad cells back to the factory, and safely dispose of them, ship the new cells to the customers, probably cover a significant (if not total - it was their fault) amount of the cost of replacing them in whatever they were in. Then, the cells you shipped out to replace them were inventory that no longer exists, so you have to produce more cells to meet demand (again total cost of production, most likely at increased costs due to the need to temporarily bump up the supply chain).
Add to that the lost production time that the machines were down, to find and correct the problem, and all the modern big business (PR) expenses to "manage" the situation. A nice strategy in that was the release of information on the new technology, which triggered a little bump in the stock price to help with the financial uncertainty issue. I wonder how much it cost them to get accelerated results from OSU...
Modern business is rarely measured in a dollar out/two dollars in formula. It's a complex equation that accounts for a LOT of variables, and is usually based on a lot of "ifs". A part of that "loss" was probably also because this disruption cancelled out a lot of the "ifs" that were necessary to even claim, having broke even or turned a profit, later. Hearing them say "loss" doesn't necessarily mean money out of the bank account today, it could mean money that won't ever see the bank account that their plans were counting on - like the sale of all the cells that went out to replace the bad ones.
Edit: It also likely incorporated the anticipated drop in market value (that's one of their main sources of funding). That's why I said the big news was a good strategy because it mitigated some of those losses. If too many shareholders sell off, you don't have as much capital to invest and operate - technically, that's a loss...
Last edited by toddshotrods; 06-25-2012 at 08:19 AM.
Reason: market value