Fisker Automotive Inc., a maker of luxury plug-in cars that’s seeking investors to fund operations, lost a potential automotive partner and furloughed employees for a week to save cash. Fisker also retained restructuring lawyers, according to a person familiar with the matter.
Dongfeng Motor Group Co. (489), a Chinese carmaker that had considered buying a stake in Anaheim, California-based Fisker, said yesterday those discussions are over. Fisker has repeatedly declined to identify specific companies it’s talking to.
Xu Ping, Dongfeng’s chairman, told reporters in Hong Kong that acquisition talks ended as there was “some distance” between Fisker’s future development and the Wuhan, China-based automaker’s plans. Dongfeng had offered $350 million for majority control of Fisker, people with knowledge of the matter said last month. Neither company confirmed that bid.
Fisker has struggled since halting assembly of rechargeable Karma sedans last year when the supplier of the $103,000 car’s lithium-ion batteries, A123 Systems Inc. (AONEQ:US), filed for bankruptcy. Henrik Fisker, the auto designer who co-founded the company, quit this month over unspecified disagreements with other executives.
The closely held carmaker retained restructuring lawyers from Kirkland & Ellis LLP, said a person familiar with the matter who declined to be identified because the move isn’t public. The law firm’s corporate bankruptcy and restructuring practice is one of the biggest in the U.S.
Roger Ormisher, a Fisker spokesman, declined to comment. Kirkland’s role was reported yesterday by the Wall Street Journal.
Fisker Automotive, with celebrity customers including singer Justin Bieber and actor Leonardo DiCaprio, has sold about 2,500 Karmas in the past two years. It has raised more than $1 billion from private sources, including Silicon Valley investor Kleiner Perkins Caufield & Byers, and was awarded $529 million in low-interest federal loans in 2009 to develop and build its plug-in hybrid cars.
That hasn’t been enough to sustain operations after a slower-than-expected startup, technical flaws that led to two Karma recalls and the A123 bankruptcy. Fisker said last year that the Energy Department blocked access to the loan after the carmaker failed to meet an initial timetable for Karma deliveries.
“In parallel with the process of identifying a strategic partner, Fisker is, of course, continuing to manage its day-to- day operations and has recently instituted temporary furloughs for its U.S. workforce covering the final week of March,” the company said this week in an e-mailed statement.
More than 200 employees are affected by the action, Ormisher said.
“Cash is the bugaboo for startup car companies -- it always has been,” said Jim Hall, principal of consulting firm 2953 Analytics in Birmingham, Michigan. “Undercapitalized car companies aren’t car companies for long.”
Fisker’s Karma goes as far as 40 miles (64 kilometers) on electricity before a gasoline engine kicks in. The company’s U.S. loans came from the Advanced Technology Vehicle Manufacturing program created under President George W. Bush to help automakers build more fuel-efficient cars and trucks.
Loans were awarded in 2009 to Ford Motor Co. (F:US), Nissan Motor Co. (7201), Tesla Motors Inc. (TSLA:US) and Fisker for the companies make battery-electric and plug-in hybrid vehicles, part of an initiative by President Barack Obama to get a million rechargeable autos on U.S. roads by 2015.
“Another Obama green energy bet appears to be coming up red,” Senator John Thune, a South Dakota Republican, said in an e-mailed statement. “President Obama’s multimillion dollar gamble to manufacture $100,000 luxury electric vehicles in Finland was questionable from the beginning. Today taxpayers are closer to losing millions on another fledgling stimulus project.”
While Fisker’s Karma was designed in the U.S., the car is built under contract by Valmet Automotive Oy in Finland, an arrangement set before it got the loans. Those funds can be used only for engineering and assembly work in the U.S., a requirement Fisker officials have said the company followed.
Fisker Automotive has said it’s in talks with potential investors to raise funds to get a second model, the lower-priced Atlantic plug-in car, into production. Fisker’s Ormisher declined to discuss details of the company’s financial situation.
The weeklong furlough is intended “to manage costs and operations based on current activity levels and commercial requirements and is not expected to materially impair Fisker’s operations or the scope or timing of Fisker’s future business plans,” the company said in the statement. The furlough was reported earlier by Reuters.
Work on a Wilmington, Delaware, plant where Fisker wants to build the Atlantic stopped more than a year ago, after access to the remaining portion of its low-interest loan for the project was blocked.
“Unfortunately, the taxpayers’ investment in Fisker produced very little except a few luxury vehicles for pop singers and movie stars,” Senator Chuck Grassley, an Iowa Republican, said in an e-mailed statement.
Aoife McCarthy, an Energy Department spokeswoman in Washington, declined to comment on details or timing of Fisker’s loan payments. The Energy Department “stopped payment on the federal loan in 2011 after Fisker stopped meeting their milestones, and is committed to the best outcome for taxpayers,” McCarthy said.
Separately, Waltham, Massachusetts-based A123 said in a U.S. regulatory filing yesterday that it has changed its name to B456 Systems Inc.
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