After a Turbulent Decade, A123 Plans New $40M Campus—and Layoffs

Livonia, MI-based A123 Systems, the maker of lithium-ion batteries primarily for use in electric cars, has once again pruned its operations to fit global cleantech demand.

On Monday, the company announced plans to invest $40 million in a new, consolidated corporate headquarters, manufacturing center, and engineering base on 32 acres in Novi, MI, despite the skittish U.S. market for electric vehicles. (After a drop in 2015, electric vehicle sales rebounded somewhat in 2016 thanks mostly to Tesla.)

As part of the consolidation, 200 manufacturing jobs are being cut—eliminating roughly a third of A123’s workforce in the state. However, CEO Jason Forcier characterizes the restructuring as positive news  indicative of the company’s continued growth overseas and Michigan’s status as a hub of engineering talent.

“We’re consolidating all of our Michigan operations in one place and doubling our engineering footprint,” Forcier says. “Our payroll will actually be $10 million higher because we’re cutting low-paying, hourly manufacturing jobs while increasing engineering jobs that pay five times as much.”

A123 expects to start construction on the new Novi complex this fall, with the move-in date projected to be at the end of 2018.

A123’s fortunes have been mercurial since the company launched in 2001. It was in the vanguard of clean-energy innovation in the U.S. and was bolstered by hundreds of millions of dollars in state and federal grants, as well as deals to supply batteries for luxury electric cars. In 2009, A123 had the year’s largest initial public offering, raising $371 million. But just three years later, the company appeared to be in trouble as it filed for bankruptcy.

Chinese multinational Wanxiang eventually bought and restructured A123 in 2013. After the restructuring, there was some confusion over whether the company had changed its name to B456, but today, it’s known as A123 Systems LLC.

The company was in the news again in 2015 after it sued Apple in Massachusetts district court, accusing the tech giant of poaching its employees. Apple and A123 eventually reached a confidential settlement on the matter a few months later, and the lawsuit was dismissed.

Before the 2012 bankruptcy, A123 was based in Waltham, MA, with a research and development presence in Michigan. That has flipped—A123’s corporate base is now in Michigan with some R&D work continuing in Waltham, and additional facilities in China and Czech Republic. Forcier says the company has approximately 2,000 employees globally, 600 of whom work in Michigan.

“We’ve spent the last year hiring engineers in Michigan at a rapid pace, and we’re going to accelerate that pace going forward,” he says, adding that he anticipates hiring 50 more engineers in the state over the next 18 months.

Although A123 has primarily produced batteries for the automotive market, it also dabbled in grid-scale energy storage before selling that portion of its business in 2014, Forcier says. Electric vehicles were the hottest innovation in the auto industry a decade ago; today, the rise of autonomous vehicles is largely driving the industry’s innovation narrative. However, as he points out, that’s in the United States. In other parts of the world, electric vehicles are still a hot item.

In fact, Forcier says, the Chinese electric-vehicle battery market is booming, with Europe not far behind. In China, he says, consumer demand is driven by government incentives to combat a serious pollution problem. In Europe, on the other hand, it’s all about fuel economy and emissions.

“Coming out of bankruptcy, we focused on low-voltage batteries” like the kind popular in Europe, he explains, and later ramped up production of the high-voltage batteries favored in China.

“The U.S. market is honestly not growing from an electric-vehicle perspective,” Forcier says. “Tesla is really the only U.S. manufacturer doing anything with EVs. And with the new administration, we know fuel economy standards are under pressure—they certainly won’t get tougher, and that’s why we’re consolidating our manufacturing footprint.”

But if A123’s business is China is growing that quickly, why not invest $40 million in a corporate campus there? Forcier says the answer is simple: The U.S. is where the auto industry and its engineering and R&D talent are concentrated, and the automotive sector is the market the company has chosen to pursue.

And although the growth of electric vehicles in China is heavily dependent on government subsidies to consumers, that doesn’t bother Forcier when he considers the … Next Page »

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Sarah Schmid Stevenson is the editor of Xconomy Detroit/Ann Arbor. You can reach her at 313-570-9823 or sschmid@xconomy.com. Follow @XconomyDET_AA

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