The weakest link in the Karma battery

This is just too relevant for quality management to pass by. Plus it is about a nice car, which makes it even more difficult to ignore. The car is Fisker Karma, the plug-in hybrid with a massive battery pack. The issue is with the battery pack, supplied by A123 company. This piece from Bloomberg provides a fairly comprehensive overview of the case, but here are couple of excerpts that are particularly interesting:

Five customers are potentially affected by the defects, David Vieau, the company’s chief executive officer, told reporters today in a conference call. The root cause of a $107,000 Fisker Karma model shutting down in tests this month by Consumer Reports is associated with A123’s defective batteries, Vieau said, without naming other customers.

 

The cause of the defects described today was faulty calibration of one of four welding machines in the Michigan plant that caused misalignment of a component in some cells, Vieau said today. The flaw could cause an electrical short, which could result in premature failure of the battery or decrease performance and reduce battery life, he said.

 

While the rate of total cells welded by the faulty machine is “a fraction” of the product A123 made in the Michigan plant, the probability is “very high” that a module or pack contains a defect because of the number of cells that go into them, Vieau said. “We feel that virtually all the product that we produce in this facility has been effectively contaminated by this particular defect,” he said.

First, it is commendable that A123 has identified the root cause and were able to nail it down to a particular production step, and they’ve done so pretty quickly. Second, the case underscores the importance of quality management when there is a massive interaction between components in a product. One faulty part out of a thousand can trigger a chain reaction, thus leading to the failure of the entire product. In this case, it is surprising that such possibility was not prevented by the design of the battery.

A123 seems to be doing well in terms of damage control though. For one thing they are undertaking the replacement of $55M worth of batteries made at the Michigan plant. Also they are upping warranty terms on Karma’s batteries, clearly betting on the future demand. Such level of interaction between the companies is remarkable. Probably it has to do with the fact that A123 holds a stake in Fisker who is its major customer.

 

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6 thoughts on “The weakest link in the Karma battery

  1. Reading this case makes me immediately think of the contrast to the Ford-Firestone case we discussed in class. In this regard it is interesting that “A123 holds a stake in Fisker”, which fosters better communication between the organizations than we saw with Ford and Firestone. Obviously this case is less controversial than the Ford-Firestone case because the defect would most likely “result in premature failure of the battery or decrease performance” and didn’t result in car accidents but the idea that it is important to identify the root cause of defects when it comes to quality management is reflected in both cases.

    I am double majoring in Environmental Studies in Emory college so I found this case particularly interesting and think that it is important that companies working with these plug in hybrids admit their mistakes, as was done in this case. When there is new technology there are bound to be issues so I appreciate the way that A123 handled this situation. With consumers who might be skeptical of hybrids it is important to continue to do good business and communicate these situations clearly.

  2. Consumer Reports rarely buys the cars they test, this was one of the few exceptions. Also Consumer Reports only drove the Karma for 180 miles before the entire electrical system shorted.

    On a side note, a few weeks ago there was an explosion at a GM research facility. This explosion was attributed to stress testing the batteries from A123 and left one technician in critical condition.
    http://www.autoblog.com/2012/04/18/gm-battery-lab-explosion-cost-could-reach-5m/

    Lastly, Fisker revealed the Fisker Atlantic at the 2012 NY Auto show and the battery is again to be designed and manufactured by A123 Systems.

  3. This is reminiscent of the TATA Nano issue. The Nano is the cheapest car in the world that retails for around $3000. It was set to revolutionize the the automobile industry in India and the world. As soon as TATA starting selling it, they had to recall 140,000 cars because they had faulty starter motors. Even though TATA took responsibility, they failed to effectively communicate with the customers and provide justification/reasoning for what happened. The public relations of the whole situation was handled very haphazardly. The result was losing millions of customers and the Nano being voted as the least satisfying car of the year. http://indiatoday.intoday.in/story/tata-nano-ranks-last-in-user-satisfaction-survey/1/130838.html

  4. I find the most interesting part of this case to be that A123 is a stakeholder in Fisker. Is this something that is common in buyer-supplier relationships? Also, how does this effect the buyer-supplier relationship between Fisker and A123? I guess it would at least partially depend on how big of a stake A123 has in Fisker.

    Originally, I thought it was a good preemptive move on A123’s part to become an owner in Fisker because Fisker is a major customer and this will help secure a long term relationship. In addition, it somewhat alignes the incentives of Fisker and A123, which could potentially secure profitability for both companied.

    However, on second thought, I feel that it could be detrimental to both companies. After an incident like this, other stakeholders in Fisker could be skeptical of Fisker’s decision to continue using A123 as a supplier. It seems that this could give both companies blinders, causing them to miss out on opportunities to find a better buyer/supplier that will increase their profitability.

  5. Pingback: Has Wall Street overreacted to LULU quality issues? | Operations Club 351

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