Print 26 comment(s) - last by BZDTemp.. on Apr 1 at 7:52 AM

Fisker is trying to save a few dollars while it looks for investors

Fisker Automotive's spot between a rock and a hard place looks to be safely secure as it continues looking for financing solutions, and has to make major cuts in the meantime.

Fisker has placed its U.S. workers on furlough this week to try and keep costs down while it searches for an investor. This means that the U.S. workforce will have a temporary, unpaid leave until the company gets back on its feet. 

"This is a common practice, particularly in the automotive industry, to manage costs and operations based on current activity levels and commercial requirements," said Fisker.

Fisker has more than enough issues on its plate right now. In April 2010, Fisker received $529 million in DOE loans, which were part of a program to progress development of high-tech vehicles. The loans were also meant to revamp a closed General Motors plant in Wilmington, Delaware for Fisker EV production. However, Fisker fell a little behind on its production schedule, and in May 2011, DOE froze the loans due to "unmet milestones." Fisker had only drawn $193 million of it at that point. 

Due to these money issues, Fisker is having a hard time securing funds to make its second car -- the Fisker Atlantic. Fisker is now looking for investors to help out with the financial situation so Atlantic production can begin. 

Fisker's investor solution has drawn a lot of criticism though, because two potentials have been Chinese companies -- 
Zhejiang Geely Holding Group and Dongfeng Motor Group Co. This has rubbed the U.S. government the wrong way, since Fisker received U.S. taxpayer dollars to fund its Karma plug-in. 

The Karma itself has had to be recalled in the past too, as battery supplier A123 Systems (which went bankrupt last year) vowed to replace nearly 600 Karma batteries for $55 million in 2012. 

A123 Systems, which filed for bankruptcy in October 2012, was acquired by Chinese firm Wanxiang Group for about $260 million in December.

Earlier this month, Fisker's problems escalated to a new level when Henrik Fisker, who co-founded Fisker Automotive in 2007, stepped down as executive chairman citing "several major disagreements" with "Fisker Automotive executive management on the business strategy."

To make matters worse, Fisker Automotive is expected to make a loan payment to the DOE next month. 

Source: Reuters

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House of cards
By FITCamaro on 3/28/2013 1:01:35 PM , Rating: 5
All comes crumbling down. This is why the federal government isn't supposed to be in the business of playing venture capitalist.

RE: House of cards
By M'n'M on 3/28/2013 3:58:21 PM , Rating: 2
I would say there's an even better reason. How would you like to be one of Fisker's (or Tesla's) competitors. With Govt pockets backing your competition, it that fair ?

RE: House of cards
By BZDTemp on 3/28/2013 7:24:07 PM , Rating: 5
Which competitors are you talking about?

I for one have a hard time finding any US car companies that have not been award government loans or other types of financial aid. And that is not even including the tax benefits that are awarded to car buyers.

Please name a US car company that has not been given government money just in the last five years.

Lots of businesses are getting either direct on indirect Government money. Sometimes the goal is to keep or create jobs in specific regions and other times it is to help ensure jobs stay in the US or to boost the chance of US companies do well in the global market.

RE: House of cards
By M'n'M on 3/29/2013 12:39:21 AM , Rating: 2
Please name a US car company that has not been given government money just in the last five years.

Aptera Motors. They were a small start-up, not unlike Tesla. Whereas Tesla was saved from closing it's doors by the Govt loan, Aptera was denied.

RE: House of cards
By BZDTemp on 3/29/2013 11:59:56 AM , Rating: 2
Technically I don't think they count as a car company since it was about 3-wheeled vehicles, but ignoring that then yes they did not get access to government money.

However my point still stands. The car industry as a whole has and is seeing lots of government money so when people complain about Fisker getting a loan, they should rather complain about how GM, Ford and Chrysler have been getting government money both directly and indirectly (tax benefits to the customers).

RE: House of cards
By BRB29 on 3/29/2013 2:34:48 PM , Rating: 2
Ford actually pays the loan back with interest and on time.

RE: House of cards
By BZDTemp on 3/31/2013 11:55:51 AM , Rating: 2
Yes, but that is not really the point here besides Fisker may still pull through and be able to repay the loans.

Some people complaining that Fisker was given a loan claiming it to be anti-competitive and making it sound like it was special that Fisker received a loan. However those people seem to have forgotten that the whole industry is getting lots of government help.

RE: House of cards
By Reclaimer77 on 3/31/2013 12:08:08 PM , Rating: 2
Not a chance. The problem with Fisker is, well lets be honest, the product sucks.

Sure they *could* pull a complete 180 and come out with something actually appealing, but meah...don't bet on it.

Musk called it when he talked about Fisker, they put design over function way too much. The engineering on the vehicle is just...well, bad.

RE: House of cards
By BZDTemp on 4/1/2013 7:52:16 AM , Rating: 2
Musk called it...

Musk is hardly an objective observer. If anything he has the most to gain from Fisker going under. Plus lets not forget that Tesla actually sued Fisker and lost big time so he will happily put down Fisker.

But of course you don't give any thoughts to quoting Musk as if he was speaking nothing but truth because it fits well with your own way where anything is either perfect or crap (mostly crap it seems).

RE: House of cards
By Shadowself on 3/28/2013 4:22:27 PM , Rating: 2
FIT, if you do a bit of searching, you'll find these kinds of loans have been on the books of the U.S. Federal Government since the 50's. (The laws I utilized for these kinds of things date back to the Eisenhower era.) While it is not well publicized, one significant function of the Federal Financing Bank is to fund these kinds of loans through various U.S. Government Agencies. When the FFB was established in the early 70s (again, under a Republican administration), the number and size of these kinds of loans significantly increased. Believe it or not these kinds of loans were used in the mid 70s to fund efforts through DOE and HUD in -- wait for it ---- Israel (most were done, again, under a Republican administration)! Yes, the funds were not even used in the U.S. The recently highlighted loans that are failing are a small fraction of the overall set of loans.

Most go quite well.
The general financial deals are...
The U.S. Government gets a filing fee (0.5%, fixed) to just apply for the loan.
The OMB sets the risk rate that the borrower has to pay before getting the loan. The risk rate can be 0 to 100% of the loan. However, I've never heard of OMB hitting anyone with more than a 30% fee.
Then once the disbursements start you have to payback the loan plus interest. The interest cannot be less than the U.S. Treasury rate for an equivalent payback period.
For example: if you have a $1B loan, the filing fee is $5 million just to get the USG to look at the paperwork. If OMB says the risk rate is 10% then you have to come up with a loan guarantee of $100 million before your loan is issued. Once the loan starts there is a pre-agreed to payout and a pre-agreed to payback period. If the payout is over two years you could get $9.6 million a week. If the payback period is 10 years, it could be that you start one month after the 2 year payout period and start paying back every month plus interest at the 10 year Treasury Rate.

When these work out, the U.S. Government makes out. When they fail, the U.S. loses. It's the OMB's job to figure out what the risk is and assign an appropriate risk rate. For something that is considered risky by the OMB who assesses a 30% risk fee, would you go for a loan that has a 0.5% filing fee and requires you to pay 30 points to get the loan?

In addition to all of this, most U.S. Government agencies have venture capital arms... (Hell, even the CIA has a captive venture capital arm.) They just don't advertise them. This is the way its been done for well over half a century.

You shouldn't take a few very, very bad examples and try to paint the entire system as bad.

RE: House of cards
By wookie1 on 3/29/2013 5:50:47 PM , Rating: 2
I'd prefer to not be forced into the business of providing loans to businesses. I don't care how long it has been going on and how many ridiculous branches of beauracracy do it. If this risk rating and all that is so lucrative, then people would provide the loans from their own free will and desire to get a return on investment.

The whole system is bad if for no other reason than I and all other taxpayers are forced into covering these risks. Much of the loans end up going to buy votes or pay back favors to large donors.

RE: House of cards
By Reclaimer77 on 3/28/2013 5:54:13 PM , Rating: 2
Yup. Obama helped create a "green" bubble. And like the housing market before it, it's bursting before our very eyes.

RE: House of cards
By gamerk2 on 3/29/2013 12:57:45 PM , Rating: 3
Not really. For any new industry, you see a lot of initial growth, followed by a lot of consolidation. In short, the strong survive, the rest die.

Point is, not every company that gets a loan is going to live. But the ones that do are going to be leaders in new industry, and become major job creators. That more then offsets the cost of the loan itself.

Look at solar; its cheaper then Coal per mWH in Europe now, and is a net win in several US states:

RE: House of cards
By Armageddonite on 3/28/2013 7:59:48 PM , Rating: 1
It's not about whether the government should or shouldn't invest in industry, it's whether the investment is sound. If the government never made any contribution to industry, we wouldn't be the land of opportunity you and your friends like to brag about. And it's easy to call an investment unwise AFTER it fails, but it's not always easy to cherry-pick them before...yes, even when you vote along party lines.

RE: House of cards
By wookie1 on 3/29/2013 4:12:32 PM , Rating: 2
Well, it's obviously a bad investment if the only way to get the investment made is by forcing taxpayers to do it. If it were a "sound" investment, there would be no need for government loans, there would be plenty of money from private investors since there would be the potential of some return on the investment. The very fact that government financing is needed to continue operations should indicate that it is not a sound investment!

RE: House of cards
By wookie1 on 3/29/2013 4:14:26 PM , Rating: 2
Please elaborate on your argument that forcing others to pay for select industries at the point of a gun makes this the land of opportunity? The opportunity to have money taken from you to give to politically connected benefactors?

RE: House of cards
By idiot77 on 3/29/2013 7:25:12 AM , Rating: 2
Unless it suits your interest. I see you crying hard at night at the total waste of money the DoD is. We could cut 1/2 DoD budget and only thing we'd miss is a few toys for the Navy and AF to play with.

This DoE loan is peanuts compared to anything that the DoD wastes and at least it was 1) Stopped and 2) For technological expansion which is the only thing going to save this country. Guns aren't cutting it anymore.

"So, I think the same thing of the music industry. They can't say that they're losing money, you know what I'm saying. They just probably don't have the same surplus that they had." -- Wu-Tang Clan founder RZA

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