A123 also lowered its 2012 revenue outlook to a range of $145 million to $175 million from a previous forecast of $230 million to $300 million, also due to the recall issue.
Much of the production that would have generated revenue this year will be diverted to replace the possibly defective battery modules and packs, A123 said in a filing on Friday with the U.S. Securities and Exchange Commission.
But A123 also said it is not experiencing a drop in demand from its customers, so "we anticipate that most of the revenue corresponding to our reduced guidance will be shifted into 2013."
The company, which received a $249 million grant from the Obama administration as part of a program to develop advanced batteries, said the cost of recalling the battery packs will be $66.8 million.
The quarterly loss is due to the recall campaign and "low factory utilization" of A123’s plant in suburban Detroit that the 2009 U.S. Energy Department grant helped pay for.
The expected $125 million net loss would be 133 percent wider than in the first quarter of 2011. That would eclipse A123’s previous record loss of $85 million in the fourth quarter 2011, when its revenue was $40.4 million.
A123, which developed as a start-up at the Massachusetts Institute of Technology, said it expects first-quarter revenue of $10.9 million, 40 percent less than a year earlier.
A spokesman for the company declined to comment beyond the SEC filing. More details about the company will be revealed on May 15, when A123 issues fuller financial results on a conference call, the spokesman said.
The low plant use, A123 told the SEC, "also contributed to significantly reduced gross margins on products sold, as anticipated cost savings related to volume production were not realized."
Research and development and engineering expenses associated with hiring new employees also contributed to the loss, A123 said.
In late March, A123 announced it was replacing battery modules and battery packs that could fail due to a manufacturing defect, which led to a high-profile shutdown of a Fisker Karma electric car while it was being tested by consumer watchdog Consumer Reports.
Privately held Fisker is a key customer for A123. Last November, A123 cut 35 percent of the workers at its Livonia plant due to a drop in Fisker orders.
The Livonia plant was described as the largest lithium-ion factory in North America when it opened in September 2010 with a ribbon-cutting ceremony attended by U.S. Energy Secretary Steven Chu as well as U.S. Senators Debbie Stabenow and Carl Levin from Michigan. President Obama called in for the event and was shown on a large video screen.
Among A123’s automotive customers are General Motors Co , BMW , SAIC Motor Corp , Tata Motors , and commercial vehicle maker Smith Electric Vehicles based in Kansas City, Missouri.
PepsiCo’s Frito-Lay North America division announced on Thursday that it would buy 100 electric vehicles from Smith Electric Vehicles, bringing to 280 the number of electric vehicles in its fleet. The battery packs for the Smith vehicles will be produced by A123.