This story has been updated at the end.
Fisker Automotive finally received a good review for the only model it has produced – the highly subsidized, widely panned and sometimes burned extended-range electric Karma – from automobile aficionado Jay Leno.
But that didn’t prevent the recipient of $193 million out of President Obama’s green stimulus from laying off another 40 workers. According to the Orange County Register, Fisker spokesman Roger Ormisher said the company – which had been awarded a $529 million loan guarantee by the Department of Energy only to see it halted due to unspecified shortcomings – had to halt production because its bankrupt supplier, A123 Systems, left them with a low battery inventory. Ormisher said Fisker has laid off about half its employees since February.
So Fisker’s woes – both deriving from A123 and self-inflicted – continue, and “The Tonight Show” host’s efforts will be no help. Frankly, the video review from “Jay Leno’s Garage” (he produces them regularly for all kinds of automobiles) showed tepid support at best, as he interviewed founder Henrik Fisker throughout the 19-minute feature as though he was doing a friend a favor. Rather than show much enthusiasm for the Karma, Leno instead seemed more interested in Fisker’s old Aston Martin and BMW designs. And it’s not like Leno isn’t into electric vehicles; he loves his Chevy Volt.
Celebrities may be the only thing Fisker has going for them right now, with Leonardo DiCaprio, Justin Bieber and Al Gore as appreciative owners. A series of follies since last year partially contributed to Consumer Reports’ opinion that the Karma is the worst luxury sedan (and fourth-worst sedan overall) on the market (in addition to this guy’s panning).
Now, following A123’s bankruptcy, Fisker has had its own discussions about “the option of seeking bankruptcy protection,” according to the Wall Street Journal. Henrik Fisker told Leno (when the video was shot is unclear, but it was published on YouTube on Tuesday) that only 229 Karmas are on the road, and they they have only been out “a couple of months.” If that’s the case, even if the piece was recorded months ago, then Fisker is in far worse shape than previously revealed.
Although what is known is pretty bad. The automaker is on its third CEO in a year, and has hired investment bank Evercore Partners, Inc., to find business partners or investors. The Journal said Evercore often advises companies like General Motors through bankruptcy restructuring. The newspaper – which had interviewed current CEO Tony Posawatz – said the move could result in a sale of the company, which sounds a lot like what A123’s executives were doing back in May before they negotiated an agreement with Chinese auto parts company Wanxiang Group, backed off, then ultimately reached a deal in bankruptcy proceedings.
“Any business always has itself protected,” Posawatz told the Journal in response to a question about possible bankruptcy, “but it has never been part of any plan in earnest.”
In May A123 hired its own outside consultant for the “evaluation of strategic alternatives,” which in other words meant it was seeking a buyer. As that move was announced the company tried to raise $50 million from private sources and sought another lender with fewer limitations on a line of credit than what they had at the time. Ultimately, in one of its quarterly loss announcements, A123 had to write off its $11.6 million stake in Fisker.
Similarly, according to the Journal, Fisker seeks $150 million in private investment to assure its survival. The newspaper reported that the Karma-maker is primarily looking for investors in China and parts of Europe, so the potential for more U.S. taxpayer “investment” falling at least partially into the hands of foreign ownership looks strong.
Besides saying its not interested in bankruptcy (who is?), Fisker also said it doesn’t want to sell.
“It’s not true that Fisker has any kind of wind-down sale or bankruptcy plan,” Ormisher told Reuters. “We are focused on the strategic alliance or partnership to move this forward.”
If Fisker is to survive on its own, executives seem to believe, they need to roll out their next planned vehicle for the broader public. Launching with the $102,000 Karma built for a limited customer class (celebrities and the wealthy), complicated by all the gaffes and criticisms, has left the company gasping. The next Fisker electric vehicle is supposed to be called the Atlantic and sell for approximately half the price, which still means it will be for rich people – just a little less so.
The Atlantic was to be built at a refurbished GM plant in Delaware, but the frozen DOE loan has suspended those plans. Posawatz told FoxNews.com that the company needs “a little bit more funding to take that next step,” and insinuated that the settling of the political climate might allow Fisker to return to the Obama administration with its hand out.
“We are having discussions with the DOE on what’s next now that we’re post election,” he told FoxNews.com.
The Delaware facility has sat dormant for months. In August NLPC reported the state was stuck paying more than $400,000 in utilities bills for the vacant factory, per a $21 million agreement made with the state Economic Development Office. The Delaware Journal reported that Fisker had promised a decision by this month about its intentions regarding the plant, but the state now appears to be resigned to more delay as the company figures out its next financing steps.
One thing Fisker does know is that it won’t resume production of Karmas until A123’s bankruptcy sale to Wanxiang is complete. The court approved the transaction earlier this week, but it still requires other government approvals.
Columnist Terence Corcoran of the Financial Post called the fiasco “Obama’s Fisker cliff” and ridiculed the competition between the president’s state-owned entrepreneurialism and China’s. But analyst Rebecca Lindland of IHS Automotive was more specific.
“When you’re trying to go it alone with an exotic product that isn’t exactly in high demand in the general consumer market, you’ve made a difficult situation even worse,” she told the Delaware Journal.
And now that the election is over, apparently the rent-seekers will be back at the White House looking for more “investment” in their exotic ideas.
UPDATE 12/17/2012 2:35 P.M.: A report for Fortune‘s Web site says a Fisker spokesman “took issue” with a characterization made by the Wall Street Journal article cited in this post. Roger Ormisher said the company’s board did not review ‘the option of seeking bankruptcy protection.’
“He also stressed that Fisker had hired investment bank Evercore Partners to find a strategic partner, and not to find a buyer,” Fortune reported. The report did not address Tony Posawatz’s statements about the company protecting itself or that the directors did not discuss a bankruptcy plan “in earnest.”
Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes CarolinaPlottHound.com, an aggregator of North Carolina news.