Fisker Automotive Forced to Put U.S. Employees on Furlough
March 28, 2013 12:16 PM
comment(s) - last by
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
, 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
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
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.
This article is over a month old, voting and posting comments is disabled
RE: House of cards
3/28/2013 4:22:27 PM
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
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
3/29/2013 5:50:47 PM
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.
"If you look at the last five years, if you look at what major innovations have occurred in computing technology, every single one of them came from AMD. Not a single innovation came from Intel." -- AMD CEO Hector Ruiz in 2007
Fisker Automotive's Executive Chairman Resigns
March 13, 2013, 5:25 PM
Battery Maker A123 Systems Acquired by Chinese Firm for $260M
December 10, 2012, 8:10 AM
House Committee Looks into Terms of DOE's Fisker Automotive Loans
October 23, 2012, 2:50 PM
Official: A123 Systems Files for Bankruptcy
October 16, 2012, 4:44 PM
Fisker Loses Access to DOE Loan, Lays Off Delaware Factory Employees
February 7, 2012, 11:31 AM
Ford, Toyota, and Universal Pictures Celebrate "Back to the Future Day' in Style
October 21, 2015, 4:19 PM
Consumer Reports Flexes Muscle, Hits Slumping Tesla Motors Stock
October 20, 2015, 4:13 PM
Debunked: Beneath the Lies, Nigerian "Pee Generator" Is Still Pissing Into the Wind
October 19, 2015, 7:53 PM
Hot Air? President Obama, G7 Pledge to Eliminate Most Fossil Fuel Use by 2100
June 8, 2015, 5:40 PM
Study Predicts Self-Driving Vehicles Could Rake in Billions
March 6, 2015, 8:34 AM
Dual-Motor Tesla Model S P85D's "Insane Mode" Shocks Passengers
January 28, 2015, 11:18 PM
Latest Blog Posts
Sceptre Airs 27", 120 Hz. 1080p Monitor/HDTV w/ 5 ms Response Time for $220
Dec 3, 2014, 10:32 PM
Costco Gives Employees Thanksgiving Off; Wal-Mart Leads "Black Thursday" Charge
Oct 29, 2014, 9:57 PM
"Bear Selfies" Fad Could Turn Deadly, Warn Nevada Wildlife Officials
Oct 28, 2014, 12:00 PM
The Surface Mini That Was Never Released Gets "Hands On" Treatment
Sep 26, 2014, 8:22 AM
ISIS Imposes Ban on Teaching Evolution in Iraq
Sep 17, 2014, 5:22 PM
More Blog Posts
Copyright 2016 DailyTech LLC. -
Terms, Conditions & Privacy Information