So, I actually know one of the executives (friend of a friend) at A123 and I've been hearing about the company since well before it went public. I guess these are my thoughts on the company.

Auto makers strung them along. A123's technology was cool, but ultimately no auto maker would allow itself to be beholden to a proprietary battery technology ahead of its time. Imagine you go with some new battery technology patented by company Y and create a massively successful vehicle. Next year, company Y asks for double and you're faced with Y taking your profits or having next year's model have a significantly reduced range. Companies simply can't offer that.

In A123's case, manufacturing had trouble. That needs to be clarified. When working in China, the trouble was that IP protection is poor and it's culturally normal to copy/steal other's technology. They had to split up manufacturing and create processes to make sure that their IP was safe. When looking to work with US automakers or the US government, they (and many unions) wanted manufacturing jobs in the US.

Ultimately, A123 was trying to create a premium product in a market where things are meant to be interchangeable. Imagine a company trying to sell "ultra-flour" or something. Even if it's provably better, it's not how the market operates. Auto makers were (and probably are) interested in their technology. However, it's hard to commit to proprietary battery tech. A123 always felt right on the verge of an agreement with Toyota or GM that never materialized. Toyota isn't going to single-source a component - it's against the way Toyota does business - and GM has probably learned from its past of doing the same.

I always thought that they should have focused on smaller items. A car is a major item and it's something that grabs headlines, but A123's cells could be used for other applications (and were: I think it was Black and Decker that was using A123's batteries in their high-end tools for a while). While cars are great, better batteries could be great for phones, laptops, and other applications where reducing battery life wouldn't be as terrible as reducing vehicle range - and, in fact, we've seen LTE phones that have sold very well with a fraction of the battery life of their predecessors.

EDIT: In a way, A123 was a bit like ARM. They were creating something new that could challenge incumbents and open up new opportunities. The smartphone revolution wouldn't have happened on x86 given the power draw. However, if ARM was the exclusive manufacturer of their design/instruction set, it might not have happened either. The fact that ARM licensed their IP gave companies a feeling of safety - one they never got from A123. For example, if Apple is unhappy with someone's yield on processors, delivery schedules, whatnot, they can get another fab to make their A6. If Apple were to be unhappy with A123's deliveries, they wouldn't have another place to get the same technology from. ARM's licensing meant that Motorola could use a TI processor in one phone and then evaluate whether TI was a good partner or whether they wanted to try Qualcomm for their next device - and processors from Qualcomm, Samsung, TI, nvidia, and others would all be generally interchangeable from the consumer's stand point. That wouldn't be true of substituting mass-market batteries for A123 batteries and with the world's supply of their battery technology controlled by them, that meant giving A123 a lot of leverage over you. That's where A123 had a different path from ARM and why I think a lot of companies wouldn't commit to using A123's technology - they'd be beholden to one company. If A123 licensed the technology, they might have become the ARM of batteries and seen others manufacture them while they focused on research and development. Maybe I'm completely off and it isn't a comparable situation.