Fisker Execs Kept Salaries While Employees, Taxpayers Got Taken
Thirteen of Fisker Automotive executives made more than six figures in the past year, despite manufacturing zero cars.
The news was first reported Wednesday afternoon on the automotive Web site Jalopnik.com, and later in the evening by the Delaware Journal. Jalopnik often gets the scoops when electric cars catch fire. For those unaware of the ugly saga, Fisker declared bankruptcy at the end of last month after squandering more than $1.4 billion in private investment and losing $139 million of taxpayers’ money.
According to news reports, including one from the Journal a year ago, not a single Fisker Karma – the $102,000 (base price) luxury electric plug-in embraced by the likes of Leonardo DiCaprio and Al Gore – has been produced since July 2012. Hopeful workers in Wilmington, Del. –where company officials and local politicians loudly announced the revival of a former General Motors plant for the manufacture of a second model, the Atlantic – were laid off in April 2012. Most of the rest of Fisker’s employees, in California, were abruptly dismissed a year later. They promptly sued the company, citing state and federal labor laws that they said required advanced notice before layoffs – and hired the same law firm that Solyndra’s former employees used to successfully recover lost wages.
While the rank-and-file got screwed, the executives took care of themselves. Based upon information gleaned from Fisker’s bankruptcy filing, the Journal reported that nine of the officials were paid more than $100,000 during the twelve months from November 2012 to November 2014. Four of them made in excess of $200,000. Payments consisted of salary, automobile use, health benefits, vacation payouts and expense reimbursements.
The top recipient was co-founder Bernhard “Barny” Koehler, who was paid $687,691. Ironically Koehler was the one who in August 2009 pleaded to Department of Energy officials, “We are oversubscribed in this equity round with the Energy Department support — and nowhere without it.” Three to four years later the situation was far worse, but that didn’t stop him from drawing a handsome salary and perks out of failing Fisker. At the same time U.S. taxpayers were out precious millions, and Delaware taxpayers were still stuck paying the utility bills for the empty plant that Fisker never used.
The next top earner during the period was the former GM executive who helped develop the Chevy Volt, Tony Posawatz, who joined Fisker as CEO in August 2012 and left in August this year. He took in $534,213, according to the Journal’s review of the bankruptcy filing. Posawatz spent much of his time with investment bank Evercore Partners, Inc. – which has a reputation of helping businesses plan their bankruptcies – denying that Fisker was contemplating bankruptcy and instead claiming Evercore was helping find a “strategic business partner” for Fisker. Posawatz was reimbursed for trips to Asia, fruitlessly trying to find such a “partner.”
Fisker CFO James Yost was the next highest earner during the lengthy dormant production period. The Journal said he took in $430,375. That’s a lot for someone who was supposed to be in the position of fiscal responsibility for the company. For example, in June this year Reuters – based upon documents it had obtained and insider sources who were willing to talk about the sinking ship – revealed several reasons why Fisker was tanking, despite $1.4 billion in investment.
“Fundamentally, say suppliers and some insiders, executives simply couldn’t orchestrate the complex dance that leads from a design sketch to the production and sale of a profitable car,” Reuters reported. “Spending was lavish; engineering blunders rife.”
Among the issues that can be pegged to financial unaccountability were last-minute design changes, engineering fixes, delayed delivery of components, over-ordering, stockpiling of parts, and vehicle flaws – all cited as contributions to cost overruns. An anonymous Reuters source knowledgeable about Fisker’s financial details “estimated that last-minute tweaks rendered between $50 million and $100 million of Fisker’s parts inventory obsolete.”
And then there were what might be called “excesses.” Several knowledgeable sources said the company’s iconic head Henrik Fisker and Koehler were paid $600,000-$700,000 annually, even after the company started reducing payroll the last couple years. And in May 2011, only weeks before the Department of Energy severed its loan, Fisker hosted a grand prix-themed party aboard a 146-foot yacht on Monte Carlo harbor. The price tag was estimated at $80,000-$100,000.
“Guests drank glasses of champagne served with flecks of gold,” Reuters reported. “Clad in a dark pinstripe suit and open-neck white shirt, Henrik Fisker navigated a crowd that included Prince Albert of Monaco, whom he described as the inspiration for the Karma.”
If the nicely compensated CFO Yost spoke up about such overindulgence, it was unheeded.
Then there’s the man himself, Henrik Fisker, who bailed out on the company named for himself after disagreements with the direction that Posawatz and others were taking. The Journal reported that he received $330,024 in salary and perks up until his departure in March 2013. A former designer for automakers like BMW and Aston Martin, Mr. Fisker had the ingenuity and know-how to actually create a vehicle, but apparently not the management chops or discipline to build one (and a company) from scratch. Illustrative of the dysfunction was the fact that in less than a single year, the Anaheim, Calif.-based company went through three CEOs, replacing Mr. Fisker with former Chrysler CEO Tom LaSorda, who after five months was replaced with Posawatz. Nevertheless Mr. Fisker still drew his six-figure salary.
According to the bankruptcy filing reported by the Journal, nine other executives collectively received more than $2.3 million during the 12-month period. The situation is similar to that of Fisker’s former battery supplier, A123 Systems, which received a $249 million Department of Energy grant (plus other government contracts and giveaways) but now also has gone bankrupt. As that company’s situation grew increasingly dire early in 2012, top officials moved suddenly to increase the compensation, stock holdings and severance terms for its corporate leadership.
Similarly, Fisker's management apparently didn't recognize that they were supposed to give their employees 60-days’ notice before they were cut loose. Nor did they realize, apparently, that paying themselves nicely while Delaware taxpayers paid for gas and electricity at its empty plant would look bad. Neither did they understand, evidently, that taking millions of dollars while failing to produce a single car – even one built as a toy for rich California celebrities and Silicon Valley liberals – would look even worse.
A principled presidential administration might consider seeking to recover some money on behalf of taxpayers, but that’s getting way too hypothetical.
Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes CarolinaPlottHound.com, an aggregator of North Carolina news.