November 9, 2010 / 10:07 PM / in 7 years

UPDATE 2-Battery maker A123 sees slower demand, shares fall

* A123 posts deeper third-quarter loss on plant costs

* Battery maker says bump up in sales delayed, shares drop

* A123 says wins contract to supply SAIC batteries

* Shares fall after hours (Recasts first paragraph, adds detail, comments from CEO)

DETROIT, Nov 9 (Reuters) - A123 Systems AONE.O, which develops and builds advanced battery systems, posted a deeper third-quarter loss and warned that automakers were moving more slowly on electric car projects, sending its shares tumbling.

The Watertown, Massachusetts-based company cautioned that an increase in sales from electric-car related projects it had told investors to expect would be delayed by about half a year until the second quarter of 2011.

Shares in A123 fell 9 percent in after-hours trade.

Separately, A123 said it had won a contract to supply lithium-ion cells for an electric car to be produced by leading Chinese automaker SAIC Motor Co Ltd.

The battery pack for the 2012 model year vehicle will be developed by a joint venture between the two companies, and the cells will be shipped to China, A123 Chief Executive David Vieau said.

A123 already has a contract to supply batteries to SAIC for a hybrid and a plug-in hybrid vehicle.

A123, which had its initial public offering in September 2009, posted a net loss of $43.7 million, or 42 cents per share, compared with a loss of $22.8 million a year earlier.

Revenue rose 11 percent to $26.2 million.

Operating expenses almost doubled to $41 million as the company incurred costs to open a battery plant in Livonia, Michigan that was also funded by a $249 million grant from the U.S. Department of Energy.

The plant is part of a plan by A123 to double its lithium-ion battery production capacity by the end of 2010.

A123 has been named a battery supplier for BMW (BMWG.DE) and plug-in hybrid developer Fisker Automotive.

Chief Executive David Vieau also said the company has made progress in a development deal with a major automaker that he expected would lead to a production contract. He declined to identify the automaker.

Vieau said the vehicle under development would be a pure EV powered by A123 batteries.

A123 had previously forecast that fourth-quarter 2010 revenue would jump to around $45 million, up from the average of $23 million in the previous three quarters.

“We said previously we really thought that the fourth quarter was when some of these new automotive programs would start to kick in,” Vieau told Reuters.

“Based on the customer ramp-up, it looks like that’s going to shift to the second quarter. So it’s about a six-month slowdown that we’re having,” he said.

Shares in A123 traded as low as $9.03 in after-hours trade. The stock had closed at $9.94 on Tuesday. (Reporting by Kevin Krolicki. Editing by Robert MacMillan, Bernard Orr)

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