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A123 goes back to the arm of GM

UPDATED: The courtship between A123 Systems  (s AONE) and General Motors (s GM) didn’t really work out before, but the two are giving it another try. GM on Wednesday named the lithium-ion battery maker as the supplier for its newly announced all-electric Chevrolet Spark, which is set for launch in 2013.

The volume will likely be small for the electric Spark, but the contract is a big deal for A123, which lost a bid to supply batteries for the plug-in hybrid Chevy Volt. Back then, GM decided to go with LG Chem’s Compact Power because Compact Power’s technology was more suitable and it’s a larger manufacturer than startup A123.

Investors were impressed with A123’s deal for Spark, and A123’s shares jumped 26 percent to reach $4.16 per share in recent trading.

The Massachusetts-based battery maker has long harbored an ambition to be a major supplier in the auto market. It lined up a federal grant of $249 million to build a factory, which opened in Michigan a year ago. Aside from losing the Volt deal, A123 also bowed out of a competition for a contract with Chrysler to supply batteries for an electric Fiat.

The electric car market is new and the cars being offered, whether they are hybrids or all-electric, are still pricier than traditional, gasoline-fed passenger vehicles. GM launched the Volt late last year and was hoping to sell 10,000 of them in 2011. It only sold about 4,000 through September.

UPDATE: A123 does have other car batter supply contracts. It’s selling batteries to Fisker for the luxury plug-in hybrid Fisker Karma. Fisker is an investor in A123 A123 is an investor in Fisker and signed the battery supply deal in January 2010. Fisker has since delayed the launch of its Karma a few times and only began to deliver the car to customers this past summer.

The battery maker also has deals with BMW and SAIC Motor in China through its joint venture with SAIC called Shanghai Advanced Traction Battery Systems.

A123 has put some energy into the storage market that serves power producers and utilities that want to use batteries to bank solar or wind power and uses it to manage their supply and demand. In July of this year, the company said it was going to build a 500 KW demonstration system for one of China’s top wind producers.

A123 went public on the Nasdaq in 2009, and its IPO was the largest for the year. The company has yet to make a profit though. For the first six months of this year, the company posted losses of $109.06 million on sales of $54.45 million.

Photo courtesy of GM