David Vieau, chief executive of A123 Systems Inc., has always managed to find new markets and new money just when the advanced battery maker really needed them.
When the Waltham company was a small start-up searching for a customer, Vieau convinced power tool maker Black & Decker to buy his firm’s lithium ion batteries — even though A123 had no commercially available product. After General Motors chose a competitor to make batteries for the Chevy Volt, Vieau landed contracts with Chrysler and SAIC Motor Corp., China’s largest car maker.
And as alternative energy companies struggled to raise capital during the last recession, Vieau took A123 public with a roughly $380 million initial stock offering.
A123 now needs Vieau’s magic touch more than ever if it is to avoid becoming the next Solyndra, the bankrupt California solar company that defaulted on more than $500 million in federal loan guarantees. A123, which also received hundreds of millions of dollars in government support, said in a recent regulatory filing that it could run out of cash in four to five months unless it can raise more money.
Vieau, 62, says he expects the company to “power through” and survive, noting a recent deal that landed a new customer in a new market, aviation, and a technological breakthrough that will allow A123 to slice production costs and the price of its batteries.
But A123 remains far from profitability. Theodore O’Neill, an analyst at Wunderlich Securities in New York, estimates the company must raise about $400 million in the next 18 months to stay afloat, and then raise a similar amount after that. But if anyone can pull it off, O’Neill added, it just might be Vieau.“If Dave Vieau says he’s going to power through it, I’ve got to believe he’s going to power through it,” said O’Neill. “He’s a natural-born salesman.”
Vieau, a native of Rochester, N.Y., joined A123 in March 2002 — just months after the company was founded. Colleagues say Vieau’s technical and business background made him a natural fit: He graduated from Syracuse University in 1972 with a degree in mechanical engineering, and later cofounded a tech company that made flexible circuits.
Vieau then spent nearly a decade at American Power Conversion Corp., a Rhode Island firm that makes power supply and protection systems.
“We decided to get him on board pretty early because he’s a pretty unique guy,” said Desh Deshpande, A123’s chairman and president of Sparta Group, a Stoneham investment firm. “He just had this broad spectrum of capabilities.”
These capabilities helped Vieau take A123 from a start-up with seven workers to a global firm, employing roughly 2,400. Perhaps his biggest success occurred in 2009, when A123 received a $249.1 million stimulus grant from the US Department of Energy to build a plant in Michigan to manufacture car batteries. Several months later, Massachusetts awarded the company a $5 million loan to expand another part of its battery business here and create 250 jobs.
Massachusetts officials were disappointed by A123’s plans to build a car battery plant in another state. But Vieau’s negotiating skills not only won the state loan, but also convinced the Patrick administration to support his company’s bid in Michigan, recalled Ian Bowles, former state secretary of energy and environmental affairs. Vieau argued that growing in Michigan would help the company add jobs in Massachusetts.
“I found him to be someone who had a good ability to stay on top of all the key details,” Bowles said. “It was certainly bittersweet to help them get jobs in another state.”
Ultimately, A123 may have bet more heavily on electric cars that it should have. Sales to the transportation sector accounted for almost 70 percent of A123’s revenues in the first three months of 2011, financial filings show, but fell to about 40 percent in the same period in 2012.
Late last year, one of A123’s biggest customers, Fisker Automotive, the California company that makes the Karma electric hybrid, cut its orders for A123 batteries after saying it would build fewer vehicles. Soon after, A123 discovered its plant near Detroit had produced defective batteries, forcing a recall that cost the company nearly $67 million.
“They’re facing some significant issues,” said Kevin See, an electric vehicles analyst with Lux Research Inc. in Boston who follows A123. “Hit after hit, basically.”
Vieau conceded that A123 probably ramped up too quickly in Michigan, taking on big costs even as the market for auto batteries slowed. Still, he noted, the company has flirted with the edge before but always managed to pull itself back.
His key for turning things around: diversification. During a recent tour of an A123 factory in Westborough, Vieau walked the plant floor, pointing out the breadth of the company’s product line as workers quietly assembled power packs of various sizes.
“This is used in a data center,” Vieau said, gesturing to a clear rectangle casing that housed cylindrical lime-green batteries. In another area, a bookshelf-sized rack held larger battery packs, that would be used as part of a system to store power for the electric grid.
At the company’s headquarters in Waltham, Vieau has no office, preferring to sit in a cubicle among employees so he’s easily available — especially at times like this. He’s holding more meetings with workers, while answering questions submitted via an internal query system. “The open communication has been good,” he said.
As for his strategy to get A123 back on track, Vieau breaks it down to the basics: The company, he said, must continue to innovate, attract more customers wanting to buy A123’s grid and telecommunications batteries, and push into new markets. Last week, the company said it planned to sell stocks and warrants to raise about $9 million.
On Friday, A123 stock closed at $1.16 a share. The stock peaked above $25 a share in 2009.
“We will raise money,” Vieau said. “We power through it.”
But that will be difficult because the battery markets A123 is targeting are nearly saturated with competitors, said Anissa Dehamna, a research analyst for energy storage at Pike Research in Washington. “There are a lot of technology companies that A123 is competing with,” she said.
Vieau, however, remains steadfast in his belief that A123 has staying power. Vieau recently took delivery of a silver BMW hybrid that runs on A123 batteries, and pointed to the sleek vehicle as a tangible symbol of his company’s successes.
“It’s awesome,” Vieau said as he drove. “Because it’s got the [A123] technology in it, I’m excited.”
But O’Neill, the analyst from Wunderlich, isn’t as optimistic about the company’s future. He said A123 may have to shut down its Michigan plant and return to making smaller batteries. Still, he said, Vieau has built a reputation for pulling through hairy situations by finding new markets.
“First it’s electric cars, and then when it isn’t, it’s electric utilities. And when that’s not happening, [A123] comes out with a new material to replace lead acid batteries,” O’Neill said. “When that doesn’t come through [they’ll] come up with something new like powering submarines. I mean, who knows what’s next?”