The EV Business Grows Up

By Bill Moore

Posted: 23 Sep 2009

Lawsuits and IPOs. It's almost like the electric vehicle business is starting to look real. No longer just the bailiwick of dreamers and schemers, the business of building electric cars and the components that make them run seems to be moving from a long adolescence into adulthood.

What makes me say this? Three news items: V Cars, LLC V. Chery Automobile, Eberhard V. Musk, and the A123 IPO.

V Cars, LLC V. Chery Automobile Co. Ltd
First, V Cars, LLC (formerly Visionary Vehicles) versus Chery Automobile Co. Ltd. pits Malcolm Bricklin and his investors against the Chinese automaker. As documented in the film The Entrepreneur, Malcolm Bricklin invested months of his time, energy and other people's money looking for a manufacturing partner to build what he envisioned as a Mercedes-Benz class electric-drive car. When Fiat and a Russian carmaker wouldn't play ball, he turned to China and Chery, who reluctantly agreed after much arm-twisting and theatrics to a joint-venture that gave Malcolm exclusive distribution rights in North America. Then, within less than a year, Chery announced it was throwing its lot with Chrysler, reneging on its contractual obligations to Bricklin's group.

As was to be expected, Bricklin sued, or tried to sue the Chinese carmaker, alleging...

Chery induced V Cars into giving it plans for a North American distribution business, subverted a highly-placed employee, and committed acts of fraud after it decided not to go through with a deal it made with V Cars.  V Cars charges that Chery stole contents of a highly confidential, proprietary, product development catalogue which represented millions of dollars in V Cars resources.
According to a September 23, 2009 email press release, V Cars has been trying since July, 2008 to serve Chery with the necessary legal notices, but the company refused to accept the Federal Express packages containing the legal documents. The company then had them translated and sent to the Central Authority in China on November 10, 2008, only to have the Ministry of Justice reply on May 19, 2009 that it found the 72-page complaint "unacceptable" because one sentence referred to China as a "Communist, autocratic state."

Malcolm, you don't insult the people you want helping you.

In response, Bricklin immediately filed a Motion for Substituted Service charging that Chery, aided by China’s Ministry of Justice, took extraordinary measures to avoid service. In what the serial entrepreneur describes as, "a happy end to Chery’s 'bizarre' year long legal dodge," Chery finally hired a Michigan lawyer to represent it.

V Car's announcement points out that Chery "settled with Volkswagen in 2003 after it violated intellectual property laws by using parts from the well-known Volkswagen Jetta. It also settled with GM after Chery manufactured a near-identical copy of the General Motors Chevrolet Spark that it called the QQ."

It's my opinion that Bricklin's legal challenge to collect from Chery $14 Billion in "potential profits" and $26 Million in V Car's initial investment is far from a "happy ending," but time will tell. Given the woes at Chrysler, Chery's decision to renege on Bricklin for the struggling automaker has to give Malcolm a sense of revenge and it might even open the door for a reconciliation.

Eberhard V. Musk and Tesla Motors
Which brings me to Martin Eberhard V. Elon Musk in the matter of who really founded Tesla Motors and was responsible for troubled financial condition when Musk forced Eberhard out. Around the time, Bricklin was filing his Motion of Substituted Service, Martin Eberhard, the co-founder of the then-San Carlos, California-based electric sports car company, filed his complaint in San Mateo County, accusing Musk of "libel, slander,breach of contract, failure to pay due and earned wages and negligence," among other things.

When I wrote about this in EV World Insider back in June, 2009, I was told by someone close to the events and people involved that it would likely be settled out of court, and sure enough, it has been this week.

While the terms of the settlement were not disclosed, the "co-founders of the electric car company Tesla Motors Inc. have settled their legal battle with laudatory statements of each other's accomplishments," reported the Associated Press.

"In a prepared statement, Eberhard referred to Musk as a 'co-founder.' For his part, Musk says Eberhard was 'indispensable' in the company's creation."

My guess is, Martin at least got the back pay he was looking for and probably a few other perks, besides having Musk kiss and make up.

AONE IPO
And the third event of this little triptych is the pricing of A123's Initial Public Offering, or IPO today on Wall Street. To date, the company has not made a dime, which usually isn't a good sign when seeking to go public, except, of course, back in the heady days of the Internet bubble. Still, A123 Systems convinced Morgan Stanley and Goldman Sachs to be the market makers on the deal, clearly in the hope that with the advent of electric-drive cars, demand for the company's lithium ion batteries will move it from the red to the richly rewarding black. The way IPO's usually work, MS and GS will make their sizable fees, but they also risk losing money if the shares, which they technically own then the company starts trading, drops below the opening price and stays there.

However, so confident of a successful IPO is the Watertown, Massachusetts company and its market makers, that today they raised the proposed share price from the $9-9.50 range to $10-11.50 range on 25.7 million shares or $300 million, presumably to be used to expand production. Besides providing batteries to the power tool market and Bill Dube's Killacycle, it's found the competition tough on the automotive OEM side. It has lined up Chrysler as its biggest potential customer, but at the moment, the Auburn Hills, Michigan carmaker's electric vehicle program has either gone into stealth mode again or is moldering in development limbo for lack of cash and clear direction since bankruptcy.

A123 Systems, going by the Nasdaq symbol AONE is expected to begin trading next week, so we'll see what institutional investors think of this green tech offering. And then, at some point, it's going to have to resolve its own patent infringement lawsuit filed against it by the University of Texas. Isn't life in the fast lane interesting?

So far, it appears the only folks making money in our EV World are the attorneys.

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