Fisker Automotive doesn’t have to go bankrupt: there are options, there are assets

Fisker Automotive doesn’t have to go bankrupt: there are options, there are assets

Car companies make mistakes all the time: some on the hardware, some on the software and some on the design. The difference between an established company making a mistake and a start-up company making a mistake is the ability to bounce back financially.

The issue of bankruptcy is not because the Fisker Karma is an electric vehicle in fact the Karma is a range-extender, like the Chevy Volt. The Tesla Roadster, and Tesla S, are full electric vehicles.

Fisker Automotive is (not was, yet) a start-up company with very little financial resources and room for errors. Sure, to you and me $1.2 Billion dollars sounds large, but the United States spends a Billion dollars a day importing oil. Or compare it to General Motors, which earned $152 Billion last year. Even with that much gross revenue General Motors has had it’s share of financial woes.

2013 has not been kind to Fisker Automotive. Henrik Fisker abruptly left the company that he started, 75% of Fisker Automotive employees have been laid off, with no severance, and Fisker has hired a law firm for possible bankruptcy proceedings. The Department of Energy (DOE) granted Fisker, an American automobile manufacturer headquartered in Anaheim, California, $529 million to build a car in Uusikaupunk, Finland. $192 million was used before the DOE decided that Fisker was not meeting the milestones that the company and the DOE had agreed upon.

The loan was supposed to aid in the reopening of an old General Motors plant that had laid off thousands of Saturn and Pontiac workers. The Departments Advanced Technology Vehicles Manufacturing (ATVM) Loan Program was created with strong bipartisan support in 2008 and signed into law by President George W. Bush.

Part of Fisker Automotives problem originates from it’s relationship with A123 Systems, the battery company. When youre a start-up like Fisker you cant create an entire car, including the engine, by yourself. When your car company is creating an entirely new powertrain you have to rely on new start-ups, like yourself, or create your own lithium-ion battery packs.

Tesla buys the technology from Panasonic and produces it’s own battery. Chevy buys individual cells from LG Chem and packages the battery pack it’self at a General Motors facility in Brownstown Township, MI.. Both companies do this so that they can control the design and manufacturing of the powertrain.

A123 also received DOE money – $249 million. A123 filed for bankruptcy in October, 2012. In January, 2013 the US courts approved China-based Wanxiang to buy A123 Systems for about the same amount as the DOE had invested.
Citing bankruptcy records as it’s source, Bloomberg News reported that Fisker Automotive had sued A123 for $140 million over quality and reliability problems in their batteries. A123 and Fisker settled for a mere $15 million.

Is all lost for Fisker? That depends on whether or not someone will buy them. Fisker has assets: a beautiful concept car, named Atlantic, that was shown on the eve of the 2012 New York Auto Show; and a manufacturing plant in Delaware, which is conveniently located next to a port. The former General Motors executive that spearheaded the Chevrolet Volt, Tony Posawatz, is still with Fisker Automotive. Additionally, General Motors supplies the 2.0-liter General Motors-sourced Ecotec engine to Fisker for the Karma.

The question is how much cash does Fisker Automotive have? Can they stay alive while courting a Chinese company, such as Zhejiang Geely Holding Group, parent to Volvo? How long before they have to make their first DOE payment on the $192 million loan? Tesla got their loan four months before Fisker, and Tesla has already made a couple of payments, so Fiskers payments should be looming on the horizon.

If Fisker could find a company to partner with, and produce a car in the Delaware plant they could use BMWs Spartanburg plant as an example. BMW exports over 70% of the cars produced in Spartanburg to other countries.

If Zhejiang Geely Holding Group wanted to buy Fisker they could use the plant to produce the Volvo XC90 and export the car to other countries. Assuming that Zhejiang Geely Holding Group would want to gain a foothold in the United States, they could import Chinese cars through the Delaware port, housing them at the Delaware plant. Zhejiang Geely Holding Group did not respond to an email.

Its not what was initially planned for Fisker Automotive, or for the Delaware plant, but the Chinese buying Fisker would keep it alive and opening the Delaware plant to full production could add 4,000-5,000 workers.

Fisker has to act fast and be able to negotiate with the DOE and the company willing to buy them. Time will tell.

About the Author:

Lou Ann Hammond is the CEO of Carlist and Driving the Nation. She is the co-host of Real Wheels Washington Post carchat every Friday morning and is the Automotive, energy correspondent for The John Batchelor Show and a Contributor to Automotive Electronics magazine headquartered in Korea. Hammond is a member of the North American Car and Truck of the Year (NACTOY), Women's World Car of the Year (WWCOTY), and the Concept Car of the Year.