A123 Systems Drops Chrysler, Spins Off New Company

In the past few years, A123 Systems has worked in various capacities with Chrysler, GM, BMW, Think!, Navistar, Eaton, Fisker and Magna—and that's to say nothing of its relationships with non-carmakers like Better Place and DeWalt Powertools. Some of those relationships remain, some are rumored to be in trouble, and others are officially over. Add Chrysler to the latter group.

As A123 released its quarterly earnings report today, it also took the opportunity to sever its ties to Fiat-Chrysler. Last year, the battery maker was slated to power Chrysler's ENVI lineup of electric vehicles, until that project was scrapped entirely after Fiat acquired Chrysler from bankruptcy. Earlier this year, A123 was attached to the Fiat 500 electric minicar, though apparently the Italian carmaker has found a cheaper supplier, and A123 simply isn't interested in matching prices for a project with such low volume.

The company also announced that its fingers had found their way into yet another pie and that it was spinning off a new venture called 24M. The new company will focus on providing energy storage for the electrical grid, using a combination of lithium ion and flow battery technology.

All Aboard the Lithium Ion Roller Coaster

Meanwhile, A123's stock fell more than 10 percent on news that the company's second quarter costs were higher than expected, while revenue was not. The company reported a loss of $0.33 per share—about 20 percent higher than expected.

The lithium ion battery racket sure isn't easy. Grant money and venture capital continue to be the main driver, and research and supply relationships are almost never exclusive. One month it looks like "Company X" will be building batteries for a major automaker's first entry into the EV market, and twelve months later that car is scrapped in favor of another design—with a different battery supplier attached.

With that in mind, it's understandable that A123 Systems's listing on Nasdaq would have its share of ups and downs as the industry settles in and the electric vehicle market begins to take shape. But with most major carmakers just a few years away from sending their first plug-ins to market, lithium ion battery supply relationships continue to be as volatile as ever.