Fisker Automotive, developer of luxury electric cars, halted work at a former GM plant in Delaware and laid off 26 workers there because it ran out of government loan money.
Fisker had failed to meet production and sales milestones it had promised in the loan agreement with the Department of Energy, so loan cash was shut off last May. Fisker went on a cash diet, and solicited private investors, while it negotiated a new timetable with the DOE.
The cash shortage finally forced the layoff of 26 people at the Delaware factory, which was most of the crew working there to get the former GM plant back into service. Fisker also sped up the layoffs of 40 to 45 engineers at its Anaheim, Calif., headquarters.
Spokesman Roger Ormisher says those engineering jobs always were intended to vanish, once the company's $103,000 Karma sedan was well into production, but the shortage of DOE money accelerated those layoffs.
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Ormisher says Karma sales began late in November, and between 200 and 300 have been delivered in the U.S., out of an order backlog of roughly 2,000. Fisker has 45 dealers in the U.S. He says fisker also should have the OK to sell the Karma in Europe soon. It already has limited approval, and can sell a few vehicles there while awaiting the blanket approval.
Neither DOE nor Fisker would forecast how long it could take to agree on a new business plan with new milestones to resume the flow of DOE loan money.
The Delaware factory, bought from the bankruptcy assets of the old GM, is intended to manufacture three vehicles on what Fisker calls the Nina (pronounced nee-nah, not ni-nah) platform. The first, a compact sedan priced in the $50,000 range, is to go into production in 2013, though that might be delayed because of the halt. It is to be an extended-range electric.
If the batteries run low, an on-board gasoline engine would run a generator to keep juice flowing, somewhat like the Chevrolet Volt. Fisker emphasizes, though, that the gas engine never would drive the car directly. Volt's gas engine directly turn the wheels in certain, limited circumstances.
Financial Details:
- DOE had agreed to loan Fisker $528 million. Fisker already has drawn $169 million to pay the California engineers and others involved in developing the Karma. It is built in Finland, which raised some eyebrows about U.S. taxpayers' money supporting, indirectly, an overseas manufacturing operation. Ormisher says more than 50% of Karma's parts are from the U.S. and it was designed and developed in California.
- $359 million of the loan, is to purchase and refurbish the former GM factory in Delaware. Fisker has drawn only about $30 million of that before missing the DOE milestones and losing access to the federal loan money.
Official Statements From The DOE and Fisker:
DOE spokesman Damien LaVera:
"Our loan guarantees have strict conditions in place to protect taxpayers. The Department only allows the loan to be disbursed as the company meets certain milestones and demonstrates results. As has been widely reported, Fisker has experienced some delays in its sales and production schedule -- which is common for start-ups."
"As Fisker works through those issues and incorporates lessons learned from the production of the Karma, the Department is working with Fisker to review a revised business plan and determine the best path forward so the company can meet its benchmarks, produce cars and employ workers here in America."
Fisker Automotive:
"((The) strategy is to first and foremost establish strong Karma sales worldwide in 2012 and generate a strong business, and then to plan for the introduction of Nina at Delaware Assembly with the help of a loan from the DOE or other sources."
"With Karma we have made tremendous progress in a very short amount of time, developing and launching an all-new luxury plug-in hybrid Electric Vehicle with extended range (EVer) that is taking the auto industry in a new direction."
"With Project Nina, we have completed Phase One of the re-commissioning of a former General Motors plant in Wilmington, Delaware. We have temporarily delayed work at the plant based on ongoing discussions with the DOE regarding funding for the Project Nina program. As a result, we have laid-off 26 people."
"A flex model of expanding and contracting staffing for development of new cars is routine in the automotive industry. Project Nina is already well-advanced. Much of the engineering, design and development is near complete and we expect to ramp up operations again quickly."
"To date we have received $193 million of the $529 million DOE loan, mostly for the Karma program, and received our last reimbursement in May 2011. We are renegotiating some terms of the DOE agreement for the $336 million balance of the loan related to the Project Nina program."
"Fisker Automotive is in the middle of discussions with the DOE, however Fisker has been, and continues to pursue, alternative funding sources. We have successfully raised an additional $260 million of equity in late 2011, bringing the total amount of private equity financing to more than $850 million."
COMMENTARY: I have been following Fisker Automotive in previous blog posts dated January 19, 2010, February 22, 2011, May 14, 2011, and October 23, 2011 and have always been impressed with the design of the Karma.
Fisker Automotive has raised $850 million in private financing from venture capital firms Kleiner Perkins Caufield & Byers, New Enterprise Associates, A123 Systems Inc., Palo Alto Investors, Qatar Investment Authority and Quantum Fuel Systems Technologies Worldwide, and several unnamed private individual investors.
The Irvine, Calif.-based company started a limited production of Karma in March. The company plans to produce 15,000 Karmas annually, but it’s not clear at what point it hopes to reach this level of production. The company increased the price of the car–each Karma will cost $95,900, a price that’s 19% higher than originally proposed–and delayed its release, after originally promising to start selling in mid-2009 .
A123 Systems, which is supplying batteries to the Karma, projected revenue of $210 million to $225 million for 2011, of which about 47% will come from Fisker, according to analyst Dilip Warrier, at investment bank Stifel Nicolaus & Co. The production of Fisker cars is due to pick up soon.
It's unfortunate that Fisker has had to halt production at its new Delaware plant and layed off engineers at its Anaheim plant as well. Hopefully it will be able to produce the remainder of its 1700-1800 backlog of Karma orders to get back on track and be able to meet the DOE's production and sales milestones
The Department of Energy (DOE) is getting real tough with startups that received DOE conditional loans and is stopping progress payments if production and sales milestones are not being met. This all stems from the recent bankruptcy filing by Solyndra, a solar panel manufacturer, that received $523 million in loans, and left the American taxpayers holding the bag, a real embarassment to DOE officials and the Obama administration.
Courtesy of an article dated February 7, 2012 appearing in USA Today
There have been many companies that tried to look for their fate in the business.Blogging can make this happen fast because it reaches many clients all over the world.
Posted by: Jeff White | 10/12/2012 at 01:18 PM
Its unfortunate that the company is having so many problems. Its important to ensure productivity is met if government money/loans are involved.
Posted by: Nissan Specials | 05/17/2012 at 06:13 PM