Two years ago, battery maker A123 Systems seemed to have it all: millions in VC funds, development contracts with corporate giants like Black & Decker, General Electric and General Motors, and lots of goodwill and publicity for helping revive the U.S. battery market.

Last August, it filed the paperwork for an IPO. The company has raised $250 million in VC funds, according to many estimates.

Today, the future looks a little murkier.  General Motors said it will build its own batteries for the Chevy Volt, coming out late next year, and that it will get the lithium-ion cells for the battery from a coalition head up by LG Chem. (A representative for A123 said the company couldn't comment, citing an SEC mandated quiet period.)

A123 had been part of a group trying to win that contract (see Green Light post).

The company has also made batteries for Think Global in Norway, but that company suspended production of electric cars after a few came off the line. Think is now asking for financial help from the Norwegian government and others to continue. A123 is also seeking out federal loans and funds to build a factory.

Losing the GM contract and Think's problems may not be a death knell. Last year, GM and A123 – which spun out of the Massachusetts Institute of Technology at the beginning of the decade – said they would continue to collaborate on future projects regardless of what happens with the Volt.

The company also still sells batteries to other customers. It is also working with BAE Systems on hybrid drive systems for heavy vehicles, with Cessna on starting applications for jet engines and with AES on smart grid applications.  

But the loss of the Volt contract means the potential loss of millions in revenues. And it couldn't come at a worse time for the Watertown, Mass.-based company. At a time when alternative energy companies are trying to slim down, A123 has been swelling in size.

Full-time employees rose from 227 at the end of 2006 to 904 at the end of 2007 to 1,740 by November 1, 2008, according to its SEC filings. Most of these new employees were hired to man factories in China and Korea. Still, there were 195 employees in research and development at the end of 2007.

Revenue has grown steadily, but so have losses. In 2006, revenue came to $34.3 million and losses amounted to $15.8 million. In 2007, revenue came to $41.3 million while the net loss came to $31 million. For the first nine months of 2008, revenue grew to $44.9 million and losses came to $52 million.

"We expect to incur significant future expenses as we develop and expand our business and our manufacturing capacity," the company stated in an SEC filing.

Most of the company's revenue – 82 percent in 2996 and 66 percent in 2007 – comes from Black and Decker. In the first quarter of 2008, demand dipped "from the company's most significant customer." Black and Decker, like other consumer product companies, has seen a drop in demand, which could have caused this dip (see Green Light post).

The company is also seeking loans to build a factory in Michigan. Like other companies, A123 is seeking loans from the federal government.

Tags: a123systems, bailout, blackdecker, gm, layoffs, think, volt