Fisker's Federal Loans Frozen, Layoffs Follow
Not long ago Fisker caught a lot of media heat for accepting a $529 million federal loan, but the company’s latest “bump in the road” is that it has only received $193 million of it, and the rest has now been frozen.
The remainder of the U.S. Department of Energy money was contingent upon Fisker producing a certain number of Karmas by an agreed-upon deadline, but other delays and recalls have slowed their proliferation considerably.
Because of the DOE’s funding freeze, Fisker has laid off 26 workers at its former GM plant in Delaware, but not before it completed “Phase One” of an approximately $175 million rehabilitation there.
Fisker has also laid off 40 employees from its Anaheim, Calif. headquarters, citing a flexible staffing arrangement which is not out of the norm for the auto industry – and most importantly – it is renegotiating terms with DOE officials so it can get its funding turned back on.
In a phone interview yesterday, Fisker spokesman Roger Ormisher said he hopes a resolution can be reached soon. He said he could not divulge how many Karmas were to be made by now, or what new terms they were aiming for, but said about 1,500 have been built, and “a few hundred” have been delivered to the U.S.
Fisker has also accepted several million dollars from Delaware business development authorities, and layoffs from GM’s former Boxwood Road plant intended eventually to employ as many as 2,000 has raised concerns from those hoping for an automotive industry revival there.
“We are frustrated that Fisker and the DOE have been unable to come to terms on revisions to their loan agreement in time to avoid this,” Brian Selander, a spokesman for Delaware Gov. Jack Markell reportedly said. “We do remain hopeful they will double their efforts to get people back to work at the Boxwood facility as soon as possible.”
The Wilmington plant is supposed to be where production of the Project Nina trio of extended-range electric vehicles starts later this year with sales beginning in 2013. These cars, to be priced in the $40-50,000-plus range, are projected to be made in much higher volume in coming years, and could provide domestic competition against the Chevy Volt and future variants, if all goes according to plan.
And to be sure, Fisker is far from saying it is running out of money as some media outlets have implied. Other financing options can be acted on, Fisker said, if a renegotiation cannot be reached, including perhaps tapping into private equity funds. To date, Ormisher said Fisker has garnered over $850 million, and most recently secured around $260 million toward this total.
The company has been successful in garnering private support, and at the same time admits it continually has its proverbial hat out as it attempts to become a full-fledged U.S. advanced-tech automaker in these times of economic uncertainty, litigiousness and government regulations.
It could however seem a bit ironic that some in the mainstream media jumped on Fisker with a faux expose delivered with the sober tones of a breaking investigative piece. The allegations were that Fisker shamelessly took $529 million then built the Karma in Finland as if it was a hoodwink against American taxpayers.
Actually, Fisker had long since planned this, had fully divulged it to the government, and paid for Finnish Karma production with separate funds.
Of federal dollars, Ormisher said $170 million went toward domestic engineering and development costs. He previously said that Fisker first approached domestic automakers to rent manufacturing capacity, but those attempts all fell through.
Even so, $336 million in federal funds are now on hold for other reasons, as the government did have strings attached after all.
DOE loans and guarantees have reportedly been receiving increased scrutiny since solar panel maker Solyndra filed for bankruptcy in September after taking a $535 million federal loan in 2009.
And Fisker has given pause to some observers. A few months ago, it said it might deliver 3,000 Karmas by year-end, but delays turned this into less than 300 before a minor recall. Last month, Fisker decreased its 2012 sales projection to about 10,000 Karmas from an original 15,000.
The Karma’s price has also increased by as much as 20 percent since introduction. Unplanned-for increases aside, the Karma is intended as a high-profile splash prior to launch of more affordable Nina variants.
As for the layoffs, they have not affected Karma production. These are still emerging from the Valmet plant in Finland onto boats to Fisker’s worldwide customers, with Europe and the U.S being the largest markets.
“Fisker Automotive’s product strategy is to first and foremost establish strong Karma sales worldwide in 2012 and generate a strong business,” said the company in a statement, “and then to plan for the introduction of Nina at Delaware Assembly with the help of a loan from the DOE or other sources.”
According to Ormisher, Fisker still has around 600 employees in Anaheim, and the DOE snafu is not a major concern.
“This is a bump in the road,” Ormisher said while acknowledging that launching a new car company is tough, and missing a goal here or there is to be expected.
And one way or the other, he said, Project Nina is going to happen and the company is nowhere close to going out of business.