It’s looking more and more that Fisker Automotive is circling around the Bankruptcy end game. On Wednesday the company announced a temporary furlough of employees, so the company could preserve cash. On Thursday, the Wall Street Journal reported that Fisker’s management is now exploring bankruptcy, but unfortunately that article is behind the WSJ Paywall so I’m relying on a summary posted on delawareonline.com.
Fisker Automotive is facing an April 22 loan payment to the Department of Energy. According to the WSJ, the company has hired restructuring lawyers and is exploring bankruptcy.
The temporary furlough is to cover one week of time, the last week of March.
Fisker’s difficulty is a string of problems which I went over in detail on TorqueNews: Fisker’s horrible year leading to Henrik Fisker’s resignation
- A recall over a year ago due to battery pack manufacturing problems by A123 Systems
- A series of problems with A123 Systems that led to their bankruptcy in October 2012, and eventual buyout by the Wanxiang Group
- Inability to manufacture new Fisker Karma’s since July – hence no revenue
- The Dept. of Energy froze the ATVM loans to Fisker Automotive
I was unable to read the WSJ article, and the Delaware Online article focuses more on the political impact in Delaware. (It’ll deal a blow to Gov. Jack Markell)
In December, Fisker Automotive reportedly began exploring buyout and was seeking bids from other automakers. That route of action would have seen Fisker become a subsidiary of some other automaker, and there were two Chinese automakers leading the bidding process. However that line of action derailed with Henrik Fisker resigned a few weeks ago, and then the two leading automakers pulled out.
A Reuters article from that time period has a decent write-up of the internal argument over which Henrik Fisker left. “The abrupt resignation of Fisker Automotive’s founder Henrik Fisker was prompted by disagreements with the company’s chief executive over funding and operational strategy, two people familiar with the matter said.” Specifically, Henrik Fisker wanted the company to focus on slimming down, ignoring the Dept. of Energy loan, “But Fisker, a noted designer who also has worked for BMW and Aston Martin, was opposed to relying on additional federal funds. He also favored a smaller operating budget than the one backed by Posawatz. The difference between the two budgets was in the ‘hundreds of millions’, one source said.”
Tony Posawatz was brought on-board from General Motors last summer, where he had led the Chevy Volt program for years. Posawatz “sought to work with the U.S. Department of Energy to regain access to a $529 million federal loan.” That loan program was frozen over a year ago after Fisker Automotive repeatedly failed to fulfill business development milestones required by the loan.
That appears to mean the company found it impossible to proceed with the buyout option, and is now having to ponder bankruptcy.
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