A123 will replace defective battery packs, takes blame for Fisker Karma glitch

A123 Systems is replacing lithium-ion battery modules and packs that could fail due to a manufacturing defect, a problem that recently led to the high-profile shutdown of the Fisker Karma luxury sedan during testing by Consumer Reports magazine.

A123 said it discovered defects in certain cells made at its plant in suburban Detroit that CEO David Vieau said can "result in premature failure of the battery module or pack, including a decrease in performance and reduced battery life."

The company, which developed as a start-up at the Massachusetts Institute of Technology, has begun building replacement modules and packs, and expects to begin shipping them to five affected corporate customers this week, he told reporters on a conference call today.

Vieau said A123 was unaware of any accidents or injuries related to the defect and said the defect did not create a safety issue. However, he acknowledged the defect led the Karma electric car to shut down on March 7 during testing by widely followed consumer magazine Consumer Reports.

A123 expects the replacement to cost about $55 million and that it will be funded over the next several quarters.

Vieau said the company had sufficient liquidity for the campaign but the situation would likely lead to the adjustment of A123's fundraising strategy. He declined to say how many modules or packs were being replaced.

A123 shares closed the day down 12.35 percent to $1.49 a share on the Nasdaq.

Fisker, in a statement, said today it would enhance its current customer service program to include a free battery replacement and an extension to the Karma's North American warranty from 50 months/50,000 miles to 60 months/60,000 miles.

On March 13, Fisker notified customers that it was addressing the problem with a team of 50 engineers.

"The Karma performed exactly as it was designed to," CEO Tom LaSorda said in a letter sent to customers. "The onboard diagnostics detected a fault and entered a protection mode that shut the car down to protect other components."

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