ECD solar panel company tries to weather industry shakeout | Detroit Free Press | freep.com:
BY KATHERINE YUNG
DETROIT FREE PRESS BUSINESS WRITER
FILED UNDER
Business
Michigan Business
Auburn Hills
Toyota
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A worker inspects a thin-film solar panel at ECD in Auburn Hills. The business has suffered from the global glut of solar panels and is instituting layoffs and furloughs.
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In a fiercely competitive market where solar panel prices have dropped 40% this year, some analysts say the company's thin-film laminate can no longer compete with more-efficient and less-costly products from its rivals.
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Despite the naysayers, ECD says its solar laminate is a viable product. The laminate has been installed everywhere from a solar power plant in the French Riviera to a Toyota parts center in Belgium. / December 2010 photo by WILLIAM ARCHIE/Detroit Free
www.athenainstitute.com
Just one year after reaching the half-century mark, Energy Conversion Devices, the company founded by the scientist and inventor Stanford Ovshinsky, faces its toughest challenge yet.
The company that pioneered nickel-metal-hydride batteries has in recent years turned most of its attention to selling a thin-film laminate for rooftops that converts sunlight to energy. It bet big on Michigan, building four plants in Auburn Hills and Greenville.
But now, because of a worldwide glut of solar panels, ECD is trying to survive a shakeout in an industry that has seen three U.S. solar firms file for bankruptcy this year alone.
The Auburn Hills-based company is losing money and suffering from high inventory levels, forcing it to announce late Tuesday that it is suspending manufacturing at its six plants until early 2012. ECD plans to lay off 500 of its 1,300 workers and put another 400 on furlough until production resumes.
In a fiercely competitive market where solar panel prices have dropped 40% this year, some analysts say the company's thin-film laminate can no longer compete with more-efficient and less-costly products from its rivals.
"I'm not sure how they are going to turn it around -- if that's possible," said Alex Morris, an analyst at Raymond James in Houston.
ECD insists it will prevail. "We believe we will make it through this," said spokesman Michael Schostak.
Experts see ECD as next solar industry casualty
In October 2008, Energy Conversion Devices' United Solar Ovonic subsidiary had emerged as a leader in Michigan's fledgling solar energy industry, announcing plans to build a $220-million plant in Battle Creek, its fifth production facility in the state.
Today, the plant sits empty. It was never used by ECD and plans to add 350 workers there were scrapped.
The Battle Creek plant symbolizes the struggles ECD faces in the brutally competitive and volatile solar panel market. The Auburn Hills-based company is reeling from a number of factors, including lower-cost Chinese rivals, an oversupply of solar panels and a sudden and steep sales drop in Europe.
Many are now wondering whether ECD will become the solar industry's next casualty. Many industry experts say the company's main product -- a thin-film rooftop laminate -- isn't competitive on a cost basis with other technologies.
"Bankruptcy remains the most likely outcome," Stephen Simko, a Morningstar analyst, wrote Wednesday in a note to his clients. "A high probability now exists that ECD's laminate technology will prove unable to reach cost parity with silicon-based module technology and that the company will be driven out of business."
He noted that ECD's $232 million in convertible debt due in 2013 exceeds the value of its assets.
ECD's stock plunged Wednesday to 41 cents, down 21 cents a share or 34%.
Alex Morris, an analyst at Raymond James in Houston, said he is not optimistic about the company's future, warning that the industry's small, high-cost players are likely to join the ranks of Solyndra and Evergreen Solar, two U.S. companies that went bankrupt this year.
"It's proven impossible to compete with those (Chinese) guys unless you have a lower cost structure," he said.
ECD has lost nearly $765 million during the past two years as its sales have steadily declined since 2009. It is now scrambling to restructure or refinance its debt and has hired AlixPartners, a business advisory firm, to help it find the best way to attract new capital.
Despite the naysayers, ECD says its solar laminate is a viable product. The laminates have been installed everywhere from a solar power plant in the French Riviera to a Toyota parts center in Belgium.
The company has been developing a new technology that will make its laminate significantly more efficient at converting sunlight to electricity. It will also reduce ECD's production costs.
But in his report, Simko said he believes the new technology won't reduce ECD's costs enough for it to regain profitability. He also warned, "We believe the company could face a liquidity crisis in calendar 2012 if it cannot significantly increase its quarterly sales levels."
Unlike many companies, however, ECD seems to have a knack for staying alive despite years of red ink. In the last 10 years, it has turned a profit only three times -- in fiscal years 2005, 2008 and 2009.
To raise capital, ECD has been trying to sell its battery subsidiary. Its solar products now account for about 93% of its revenue. It has also taken other steps to cut costs and restructure its operations, including laying off 300 workers in May.
Whether the company's luck will prevail remains to be seen.
"It's going to be difficult," said Pedro Guillen, managing partner of Kinetik Partners, a Walled Lake clean energy consulting firm. "Everybody's dumping the panels."
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