A123 Systems Launches Replacement Program for Potentially Defective Battery Packs and Modules

WALTHAM, Mass., March 26, 2012 (GLOBE NEWSWIRE) -- A123 Systems (Nasdaq:AONE), a developer and manufacturer of advanced Nanophosphate® lithium iron phosphate batteries and systems, today announced that the company has launched a field campaign to replace battery modules and packs that may contain defective prismatic cells produced at A123's Livonia, Mich. manufacturing facility. A123 has begun building replacement modules and packs and expects to begin shipping them to impacted customers this week. The company anticipates that the cost of replacing the affected customer modules and packs will be approximately $55 million and expects it will be funded over the next several quarters. A123 will host a conference call at 10:30 a.m. EDT.

"Recently, A123 has discovered that some prismatic cells made in our Livonia facility may contain a defect which can result in premature failure of a battery pack or module that includes a defective cell. We have isolated the root cause of the defective cells and we are confident that we have pinpointed the source of the defect and corrected it. As a result of engineering analysis and testing, we believe this is not a safety issue, and we have determined the root cause and have taken corrective actions," said David Vieau, CEO of A123 Systems. "We are working to get replacement packs and modules to impacted customers as quickly as possible. It is important to note that this defect has been discovered only in some prismatic cells manufactured at our Livonia facility. Prismatic cells produced at another A123 facility are not impacted. Further, the cylindrical cells we make at our facilities in China for a number of other transportation programs, as well as the majority of our grid energy storage systems and commercial applications, are also not affected by this defect."

Vieau continued, "In parallel with this field campaign, as we have discussed previously, we continue to implement actions that we believe will improve operations and minimize the possibility of quality issues going forward. This includes hiring a Chief Operating Officer, Ed Kopkowski, who has more than 25 years of global management and operational leadership in improving quality and reducing costs. A123 has produced hundreds of thousands of high-quality prismatic cells at another facility, so while the initial rapid ramp up of our Michigan operations to satisfy customer demand has resulted in near-term operational challenges, we are confident in our ability to overcome these issues. We are devoting our full resources to fixing this situation and moving forward to continue delivering high-quality products to our customers."

Additional information and ongoing updates about A123's Livonia prismatic cell field campaign can be found online at http://www.a123systems.com/media-room-service-campaign.htm.

Conference Call Information

What: A123 Systems' Livonia prismatic cell field campaign  
When: Monday, March 26, 2012  
Time: 10:30 a.m. EDT  
Webcast:http://ir.a123systems.com/  
Live Call: (877) 266-0479, domestic  
  (678) 894-3048, international  
Replay: (855) 859-2056, domestic  
  (404) 537-3406, international  
     
Live and replay conference ID code: 66189520

About A123 Systems

A123 Systems, Inc. (Nasdaq:AONE) is a leading developer and manufacturer of advanced lithium ion batteries and energy storage systems for transportation, electric grid and commercial applications. The company's proprietary Nanophosphate® lithium iron phosphate technology is built on novel nanoscale materials initially developed at the Massachusetts Institute of Technology and is designed to deliver high power and energy density, increased safety and extended life. A123 leverages breakthrough technology, high-quality manufacturing and expert systems integration capabilities to deliver innovative solutions that enable customers to bring next-generation products to market. For additional information please visit www.a123systems.com.

The A123 Systems, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6600

Safe Harbor Disclosure

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks, uncertainties and other factors, including statements with respect to the availability of replacement modules and packs, the timing of the commencement of shipping of replacement packs and modules, the anticipated cost of the field campaign and the number of affected battery packs. Among the factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: delays in A123's ability to produce replacement modules and battery packs and other risks detailed in A123 Systems' 10-K for the year ended December 31, 2011 and other publicly available filings with the Securities and Exchange Commission. All forward-looking statements reflect A123's expectations only as of the date of this release and should not be relied upon as reflecting A123's views, expectations or beliefs at any date subsequent to the date of this release.

CONTACT: A123 Systems PR Contact:

         A123 Systems

         Dan Borgasano

         617-972-3471

         dborgasano@a123systems.com

         

         Edelman

         Courtney Kessler

         212-277-3720

         courtney.kessler@edelman.com

         

         A123 Systems IR Contact:

         ICR, LLC

         Garo Toomajanian

         617-972-3450

         ir@a123systems.com



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