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

By Nikki Gordon-Bloomfield

1,476 views Feb 8, 2012

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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

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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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