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USA; Smith Electric scales back production goal, warns of cash crunch

Smith Electric Vehicles has slashed its production target and warned that it is running short of cash as it tries to complete a stock offering, according to recent regulatory filings.

The Kansas City manufacturer of electric trucks, hailed as part of a new wave of green-energy companies when it started in 2009, announced last November it planned to raise $125 million from an initial public offering to reduce debt and pay expenses. That cash infusion is still being pursued, but now amid signs of growing financial stress.

A company filing last week with the Securities and Exchange Commission, which updated a similar filing in late July, said Smith Electric recently pledged company assets to obtain an $11.5 million loan to ensure operations through September.

The filings also said Smith Electric had shelved ambitious plans to produce 620 trucks in 2012, instead aiming to produce 380 trucks, about a 40 percent reduction. The company told the SEC that supply troubles were causing the problems. It made 79 trucks in the first six months of the year, the filings said, but it intends to boost production later in the year to meet its lowered goal.

“Our reduced expectation for 2012 vehicle production is primarily the result of current cash constraints impacting our ability to expand our supply chain,” the company said.

The company declined requests for comment and didn’t respond to emailed questions, including about the status of the public offering.

Smith Electric made a splash in 2009 when it announced it would locate its headquarters and a production facility near Kansas City International Airport. Economic development officials predicted it would be the core of making the area a center of energy technology.

The company went on to receive $32 million in federal grants, and President Barack Obama visited the Kansas City plant in 2010 to highlight efforts in the United States to build a greener economy.

“You’re setting a model for what we need to be across the country,” he said.

The company has had some prominent businesses buy its medium-duty electric trucks and vans, including Frito-Lay, FedEx and Staples, who mainly use them for deliveries.

But Smith Electric has also burned through cash, racking up $128 million in losses since 2009. As The Kansas City Star reported in June, the company’s accountants, after reviewing Smith Electric’s 2011 financial results, said the recurring losses and questions about its ability to raise more capital had raised doubts about the company’s continuing as “a going concern.”

Smith Electric’s financial fortunes didn’t improve in the first half of 2012, when it posted a $27.4 million loss, compared with $21.3 million for the same period in 2011. The $11.5 million loan plus other cash available to the company will pay for operating expenses through the end of September, Smith Electric’s latest filing said.

A successful initial public offering would give the company another year to operate, the filing said, pay for plans to reduce costs, and allow it to improve a New York facility that Smith Electric wants to become another assembly site.

A review of the SEC filings shows issues with suppliers at both Smith Electric’s Kansas City plant and another it owns in the United Kingdom. Both assemble components — including the chassis, motor and battery — made by other companies. Some of those companies have had their own financial problems, causing an uneven flow of components. The relatively small suppliers also have high costs, as well as some reliability and quality problems have increased Smith’s warranty costs.

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