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Fisker Loan Woes: Bump In The Road, Or A Big Pothole?

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2012 Fisker Karma

2012 Fisker Karma

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On Monday, we told you that California-based Fisker Automotive had announced it was laying off employees and contractors after it missed deadlines associated with its $529 million low-interest loans from the U.S. Department of Energy. 

But while Fisker’s cull of employees has totaled at least 66 people, the company is calling it no more than a “bump in the road.”

Those brave words come from Fisker spokesman Roger Ormisher, who told The Wall Street Journal that delays and setbacks were part and parcel of launching a new car company. 

“This is a bump in the road,” he said. “Obviously we have had delays and I think we have been very open about that.”

But with Fisker still waiting for more than half of the loan money guaranteed to it under the U.S. Department of Energy’s Advanced-technology vehicle manufacturing program, is Fisker’s little bump more like a cavernous pothole? 

In order to answer that, we need to look back at the things which lead up to Fisker’s current predicament.

2012 Fisker Karma

2012 Fisker Karma

Enlarge Photo

The majority of the DoE loan guarantee awarded to Fisker was to help it complete design on and start production of Project Nina -- a mass-market plug-in sedan which Fisker has hinted will retail at around $50,000.

Regardless of where the money was due to be spent, Fisker’s current problems can be traced back to its first car, the $103,000 luxury plug-in hybrid sports sedan known as the 2012 Fisker Karma. 

Under the DoE loan deal, Fisker promised to bring the Karma to market by September 2011 2012. It missed this by three months and was then plagued by two recalls -- once for leaking battery coolant and once for software problems -- within a month. 

These delays -- along with other missed milestones -- are what Fisker blames for its recent line of layoffs, but we think there’s something more fundamental to remember. 

Cars, electric or otherwise, cost a lot of money to develop.

Even for large automakers with plenty of expertise already on hand, developing a brand new platform of automobile -- one on which many models will be built -- regularly costs upwards of $1 billion. 

That’s a large bill for most large automakers to pay. For smaller automakers, it can be debilitating. 

Fisker says that production of its Karma isn’t affected by the current financial crisis. However, in order to continue on Project Nina, the automaker will have to find extra funding. 

Unless it can negotiate new terms for the remainder of the DoE loans promised it, or find more private investment, we have to at least entertain the possibility that Project Nina will be the next stillborn victim of the electric car world. 

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Comments (6)
  1. $50,000 cars are not "mass market" vehicles.
     
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    Bad stuff?

     
  2. Maybe they were talking in 2033 dollars.
     
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  3. From the Fisker press release about the current problems:

    "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".

    I don't think is Fisker is too strapped for cash, it's the product they are turning it in to that worries me.
     
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  4. I'd have to agree with Cris here. Fisker isn't quite strapped yet and still has time to recover, but recent events don't bode well for management, either. I think they've got one more chance to get funded sufficiently, but they're already telling suppliers expect a six month delay in the SOP date, so they'd better not miss much beyond that. If I can't get a Model S and the Nina isn't available, I'll pass on the i and other future models and will reconsider the Volt. New OEMs only get a couple of chances...
     
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  5. Kudo's to GCR for revisiting this overhyped story so quickly in an effort to get the facts straight. This whole DoE / Fisker loan has been totally mis-reported by the media. (You should see how Fox News gleefully pounced on it, with absolutely NO regard for the facts.) Keep in mind, Fisker raised $260 million in December and can easily do it again (or simply borrow it) now that they're cranking out $100,000+ cars faster than anyone in history. Despite their many bumps in the road, which are to be expected with the introduction of such a technologically-advanced vehicle, once they work out these minor issues with DoE and release photos of the Nina (which I hear is as electrifying as the Karma), all this overblown BS will be long forgotten.
     
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  6. Peter, yours appears to be an overly optimistic interpretation- are you an investor, customer, or otherwise associated with Fisker? On what basis do you claim that 20 cars/day is "faster than anyone in history"? (or for that matter, that those $100k cars are priced a full 30% higher than promised at introduction.)

    It's true that no automaker in recent years has raised more money than Fisker, while actually showing or proving as little. But your assertion that they have plenty of funding and can easily raise more raises the question of why, in that case, are they laying people off? Given those many, many bumps in the road, why needlessly invite more bad press?
     
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