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Hiccup or death knell?

That's what watchers of California-based automaker Fisker Automotive are trying to figure out after the maker of the Karma extended-range plug-in luxury sedan laid off about 65 workers and contractors in Delaware and California while renegotiating loan details with the U.S. Department of Energy. Fisker, which was to receive a $529 million loan from the DOE, has received less than $200 million of that, with the fate of the balance in question because Fisker's production delays caused the company to not meet certain loan conditions.

Here's the death knell perspective: With the Obama Administration under political pressure to reduce spending, Fisker is unlikely to receive the remaining $336 million, Wunderlich Securities analyst Theodore O'Neill said in an interview with the Boston Globe. Without that funding, Fisker will go out of business, O'Neill said, adding that A123 Systems, which makes lithium-ion batteries for Fisker, will also likely go under.

But no, say others, the problem is temporary. Investment advice site Seeking Alpha, for example, says A123 is a "buy." Fisker also downplayed the issue, with its spokesman, Roger Ormisher, calling the shutdown a "bump in the road" in an interview with The Wall Street Journal. Ormisher said production of the Karma hasn't been impacted – noting that Fisker has delivered about 250 vehicles – and that the remaining DOE funds are to be used purely for the lower-priced Fisker Nina vehicle.

Fisker said in a statement last week that the company, which most recently received cash from the loan last May, is in talks with the DOE and raised $260 million in equity in late 2011. Fisker is pursuing "alternative funding sources," the company said in a Feb. 6 statement.

Additionally, the Orange County Register reported last week that a Fisker investor is suing the company for fraud. The plaintiff, Daniel Wray, invested $210,000 in Fisker and said the company informed him in January that he had to invest another $84,000 or risk losing the rights he gained with the original stock purchase. Ormisher told the newspaper at the time that he wasn't aware of the lawsuit.


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    • 1 Second Ago
  • 56 Comments
      imoore
      • 2 Years Ago
      It would be in Fisker's best interests to expand their markets. China, Australia, and South Africa, perhaps. Brazil and Russia, too. And, maybe, they could work some deal with Japan abd Korea. Just a suggestion.
        Letstakeawalk
        • 2 Years Ago
        @imoore
        Fisker already has deals in China (Grand Automotive Group also sells Mercedes, BMW, and Lamborghini). Australia's out because of their high taxes, and because Karma's limited production makes right-hand drive unfeasible. Sorry, Japan and the UK also... But Fisker does have a pretty extensive network through Europe: http://www.fiskerautomotive.com/en-us/discover/retailerlocator
      Spec
      • 2 Years Ago
      I hope Fisker can go to the private market, raise some more money, start shipping lots of Karmas, and build themselves up. I wouldn't bet on it, but I hope they can do it. And no more government money unless the fulfill ALL the required milestones.
        Nick
        • 2 Years Ago
        @Spec
        I wish to see them team up with an exiting automaker in a Joint Venture (such as Tesla does with Mercedes). I'd like to see a company such as BMW enter into the Fisker capital and develop it into a strong brand.
      2 Wheeled Menace
      • 2 Years Ago
      A123 really dropped the ball on consumer sales. Still infuriates me that they refused to sell one of the safest consumer products.... to the consumer! If the 20AH pouches can be sold for $45 after being shipped across the world, imagine what they could cost new! Thank god NMC stuff is finally trickling down to the consumer market.
      marcopolo
      • 2 Years Ago
      Fisker Automotive are probably better off, at this stage, proceeding without Project Nina. Despite Fisker being headquartered in California, the Karma has a more European design and image. The Karma is a terrific looking car with a lot of appeal to a certain type of buyer. The question, is not so much whether Fisker can survive buy selling Karmas alone, but whether the Karma's appeal will generate sufficient model longevity to allow for the next model to be produced. Fisker Automotive can survive as a stand alone luxury sports/sedan manufacturer, but for how long? The Karma is a car with world-wide appeal and can command enough profit margin to provide an adequate return on investment (especially the convertible). Critic's of the Karma's weight, EV range, cost etc, have no influence over Karma's sales figures. The sort of buyer the Karma will attract is unlikely to read ABG, or be interested in the opinions of those interested in 'Automotive efficiency' and anorak details of of few extra mpg. Certainly no hypermilers will be queueing to buy a Karma. Fortunately for Fisker Automotive, Karma buyers are sufficiently affluent to appreciate the Karma stunning design, and image appeal . The Fisker-Karma, may not appeal to everyones taste, but Karma will certainly find at least 15,000 buyers p.a., world-wide, to appreciate Karma's unique qualities. Aston-Martin, Morgan, are still manufacturing, but other famous brands in this market segment have all disappeared into automotive history. Nothing is assured! Automobile manufacture is a very high risk, capital intensive, low profit industry. It's becoming increasingly difficult for small volume, single product, manufacturers to survive. Henrik Fisker's Karma may prove to be a runaway success, but a low priced, volume product like the Nina, would find it very difficult to compete in the same market sector as GM's Volt, and other products from major manufacturers. Fisker could JVC with GM, Ford, BMW, or even Chrysler to produce attractively designed, luxury model variants. Such cost sharing ventures would do little to harm Fiskers brand appeal which is mostly image based, but provide a more viable business plan. On the balance, IMHO, Fisker Automotive is more likely to survive without Nina.
        EVnerdGene
        • 2 Years Ago
        @marcopolo
        @Marco "and can command enough profit margin to provide an adequate return on investment" that's a big ass-umption From the beginning I've doubted it can be built for under $100k (don't forget to amortize engineering and tooling costs over years in production and units sold) anything to back-it-up ?
          marcopolo
          • 2 Years Ago
          @EVnerdGene
          @EVnerdGene Gene, like you I am not privy to the Karma's costings. But, I don't think the retail price of the Karma is terribly relevant. The sort of buyer who can purchase a $92,000 dollar car, will pay $104,000 if the desire is strong enough! But that extra $12,000 x 15,000, provides an additional $180,000,000 in revenue. (all profit). Although the Karma is a stunning design and possesses some excellent engineering, the drive train is not really proprietary. This is a great advantage and must have considerably reduced engineering and development costs. Much of the work was outsourced and therefore the Karma does not have the usual ongoing expenses. Again, I agree with your concern for including in the equation the longevity of the life of the Karma design, to continue to maintain sales figures, with only periodical face lifted models. As Nick shrewdly observes, only minor modifications are necessary to offer different variations. This would be a major factor in determining the Karma eventual profitability. However, I still maintain that Fisker Automotive would be safer sticking with the specialist Karma. and building the brands reputation, than risking everything on building a product requiring the resources of a auto-manufacturer 50 times larger!
          EVnerdGene
          • 2 Years Ago
          @EVnerdGene
          @Marco I'm agreeing with you about sticking with the Karma, and that the Nina really can't compete with cars coming soon - and some we don't even know about as yet. However, having only the one car is also a formula for a slow death spiral. As Karma sales drop-off, which they surely eventually will, they will need a follow-on product. Marketing is sure not my forte, but I'd go upscale, as opposed to downscale. Their only hope in my relatively worthless opinion. err, Marco, you did it again - "and possesses some excellent engineering" that's another ass-uption I'll admit it was a great idea to have the Karma built by Valmet in Finland, who assembles many other vehicles, including some Porsches. I'd guess Valmet handled most of the manufacturing engineering. I know Frisker did a lot of design engineering in-house; and I also know that they out-sourced more than most makes would ever consider out-sourcing. I could go on and on with my opinions about this; but as we know opinions are like azzholes; everyone has one and they all stink.
          marcopolo
          • 2 Years Ago
          @EVnerdGene
          @EVnerdGene Nope, your opinion is certainly not not worthless. You are quite correct, it's a very real problem for all single model auto-manufacturers! Sooner or later the successful model becomes dated, and a new model must be created. This is were the risk really becomes a problem. The new model must be funded, and must be a guaranteed success. Morgan survives by having a clientèle that basically want the same 1930's car with a few modern modification sourced from a major manufacturer! You are also correct to believe Henrick Fisker must build cars that yield very high profits, for relatively low volume. High volume manufacture takes very deep pockets, adequate risk spread across different models, and very good administrative skills. It also requires exceptional financial and industrial leadership skills. So far, only Elon Musk has shown that sort of determination and capacity to combine all the necessary skills to create a new volume auto-manufacturer. This is both Tesla's strength, and vulnerability!.
        Nick
        • 2 Years Ago
        @marcopolo
        I agree. The Karma is an awesome car, and it can be spun into different models (shooting brake, convertible, etc..) without the huge investment required by the Nina. Also, they could offer it in different versions with more or less battery power, different battery chemistry, different equipment levels etc.. to propose it in different price ranges.
      Letstakeawalk
      • 2 Years Ago
      I think that Fisker will be able to get investment from the private markets in order to cover themselves; there's also the comments from Fisker that mention that the Karma program is already self-sustaining and not losing money.
        EVnerdGene
        • 2 Years Ago
        @Letstakeawalk
        NEW DEFINITIONS - just in from Business 101 self-sustaining: investment is cash flow profit: what they can't spend fast enough within a specific accounting period
      EVSUPERHERO
      • 2 Years Ago
      As Enderel did with Think so A123 did with Fisker. A123 invested 30 million dollars so Fisker would choose them as their battery manufacturer. Enderel invested 50 million to be Thinks battery manufacturer. All A123 batteries are currently made in Korea. They stamp, "Made in America", right on them at the Korean plant. Since all of A123 OEM customers have basically failed in their predictions of the quantity of batteries that need to be produced from Korea, Korea is stuck with a excess stock pile of the batteries. A123 does not have the demand for them as a result the Korean manufacturers are selling the stock piles to Chinese brokers. Chinese brokers sell A123 batteries to individuals that A123 would not, namely American citizens who provided the 234 million dollar grant A123 received. To produce these batteries in America and create American jobs. As a result you can buy A123 20ah batteries that cost 45 dollars in a hobby shop but A123 has discontinued the hobby shop supply as well so now the only official A123 supplier is in England and they want 74 dollars per 20ah cell. The Chinese brokers now sell A123 batteries made in Korea, stamped, "Made in America", 20ah for 17.40 dollars. These batteries will discharge at 20c without breaking a sweat. Awesome batteries, but it just seems messed up to have to buy American made batteries, built by Koreans and purchased from China.
      Nick
      • 2 Years Ago
      Could they make enough money off the Karma to finance the Nina? As far as I know, they're on the same platform.
        Letstakeawalk
        • 2 Years Ago
        @Nick
        Fisker could possibly outsource the Nina just as they have done with the Karma. The DoE loans are for buying and setting up production facilities - the engineering of the NINA is already substantially complete. The Karma and the NINA are two distinct and different platforms.
          Nick
          • 2 Years Ago
          @Letstakeawalk
          I find it strange that they'd be shooting for 2 different platforms. Why can't they use the Karma platform to save a boatload of money?
          Letstakeawalk
          • 2 Years Ago
          @Letstakeawalk
          The Karma has a rather complicated space-frame chassis. That makes it unfeasible to do really high production. The NINA will be a unibody chassis, like most mass-produced autos (including the Tesla Model S).
          Letstakeawalk
          • 2 Years Ago
          @Letstakeawalk
          Allow me to correct myself - those are the milestones that Fisker has to meet regarding the Kx (NINA) loan... The conditional loan commitment states: "The Applicant will use the proceeds of the Kx Loan to establish and complete the construction and development of a manufacturing facility in the United States to be used in the development, commercial production, sale and marketing of Fisker's Kx PHEV, all as contemplated by the Application." It is very clear that the loan is to build a facility.
          Letstakeawalk
          • 2 Years Ago
          @Letstakeawalk
          "I think we both know that outsourcing the NINA would be a VERY bad idea for Fisker. They would lose DOE funding indefinitely..." I'm saying that as an option if they lose the loan. If they lose the loan, then there's no point in worrying about losing it again; they might as well continue on with production via an alternative channel such as outsourcing. Just a possibility, and I don't think it's a bad one. "The DoE loans are for buying and setting up production facilities" The Karma loan for integration and engineering was a separate loan. I was taken to task in another thread regarding whether the NINA loan included development work - PR suggested it didn't and was only meant for production. http://green.autoblog.com/2012/02/07/fisker-lays-off-employees-halts-production-while-renegotiating/ I have since found the conditional loan agreement, the Kx (aka NINA loan) is for: 1. Purchase of site 2. Completion of construction and re-equipping of site 3. Completion of tooling for NINA production 4. Scheduling all needed tests safety, etc. 5. Commencement of Production 6. Establishment of a dealer network for NINA It doesn't pay for actually designing and engineering the NINA itself. The NINA and the Karma may have distinct similarities - four doors, PHEV, etc. But they are still considered separate platforms.
          JeremyD
          • 2 Years Ago
          @Letstakeawalk
          "Fisker could possibly outsource the Nina just as they have done with the Karma." I think we both know that outsourcing the NINA would be a VERY bad idea for Fisker. They would lose DOE funding indefinitely, and they would also have to pay back multiple grants. "The DoE loans are for buying and setting up production facilities" Not entirely, they also went (are going) towards US based engineering of both the NINA and Karma sedans. Is that not true? "The Karma and the NINA are two distinct and different platforms." Im not sure I agree with that. The NINA (sedan) and Karma are both sedans... The NINA sedan chassis is derived from the Karma sedan chassis. Both are PHEVs. Any of that not true? If it isnt then Fisker really needs to tell us why and how they are different so the NINA sedan wont continue to cannibalize Karma sales... *Oh but anybody in the market for a Karma already knows they are very different cars right...
      • 2 Years Ago
      I just stopped by the West Palm Beach Jaguar / Aston Martin / Fisker dealership, where they have a dozen Fisker Karma's on hand that they are prepping for delivery. They all just arrived within the last week, and they are absolutely stunning - the red (maroon lipstick) was the most jaw dropping among an amazing selection of colors. Fisker is doing just fine to be moving that many vehicles at a dealer that relishes that much throughput.
      Jim Illo
      • 2 Years Ago
      Yes, the Karma doesn't live up to it's hype. In all-electric mode it's barely faster than a Chevy Volt, it gets fewer all-electric miles, it's mpg rating when running on gasoline is barely more than half of the Chevy Volt, the Karma has less interior room, a smaller trunk, and it costs almost 3 times more (after $7500 tax credit) than a Chevy Volt. Yes, the Karma has cache, and looks gorgeous. But my Volt's nice looking (all black), and has all of the advantages mentioned above. I don't know who would buy a Karma.
        JeremyD
        • 2 Years Ago
        @Jim Illo
        Why did I get voted down for stating a fact that anyone who reads ABG regularly should know? If you disagree, why not explain why...
          EVSUPERHERO
          • 2 Years Ago
          @JeremyD
          Because we're full of hate around here! It was probably Ezee, he is a self proclaimed evil person.
        Jim Illo
        • 2 Years Ago
        @Jim Illo
        Oh: I'm not sure that A123 will go out of business though (I hope not - I have quite a few shares). It will be tough to lose Fisker, but I think A123 has enough other contracts in hand to survive without Fisker. Fedex is using A123 batteries in delivery trucks, and GM is working with A123 to supply the Chevy Spark.
          Ryan
          • 2 Years Ago
          @Jim Illo
          I don't know where the A123 thing came from. Unless the Chinese are flooding the market with cheap batteries that are better. Fisker needs to figure out what they are doing in order to produce and sell cars.
          JeremyD
          • 2 Years Ago
          @Jim Illo
          @Ryan Fisker is A123's biggest customer (currently). Their fates are intertwined so much so that the Karma's current lull of sales resulted in layoffs at A123.
      Dan Frederiksen
      • 2 Years Ago
      if we can trust the 250 number of delivered vehicles, didn't they say just before the end of the year that they would have 1500 delivered? and now 1½ month after new year they are supposedly at 250? the 1500 was claimed so late that there is no reasonable way that could have been an honest mistake. so late they would know the score. or am I missing something here? it's one thing to be delayed but to flat out lie.. I don't expect them to survive. and for more reasons that just the DOE loan issue. I can't help feel that that 6-700 million dollars could have been spent better..
      • 2 Years Ago
      @marcopolo, Exactly right - you should have seen how well the Fisker Karma holds up in a dealership (art studio) full of Jaguars and Astin Martins. NO ONE in that class of buyer is thinking about pure efficiency, but styling, image (green or otherwise) and comfort are well covered. The Fisker Karma is a European Salon, as opposed to the Asian stylings of the Tesla Model S, and with fuel prices multiple times higher in Europe, these vehicles will sell very well. Fisker will never JVC with GM, because GM already has a similar configuration in the Volt. Since Ford used to own Jaguar, I thought they would be a likely buyer, but BMW, VW, Porsche, Jaguar, Astin Martin et al would be a much better fit. Fiat / Chrysler, given their lack of a PHEV in that class, might need such a vehicle, but I don't quite see them as a match (Daimler / Chrysler was a disaster). I agree with you that Fisker Automotive is more likely to survive if they built the Nina at Valmet, as opposed to trying to re-open the plant in Baltimore. They must have at least one more platform to survive / thrive, and the Nina is an important class of vehicle to drive profits, so they can't just scrap it altogether.
      Nick
      • 2 Years Ago
      Any guesses as to how many Karmas Fisker needs to sell to break-even? I hope it's a low number, but I suspect it's 10,000+ Do we know how much was spent on R&D, operations, marketing etc..? Do we know they profit margin on each unit sold?
        Letstakeawalk
        • 2 Years Ago
        @Nick
        "Fisker has generated more than $100 million in revenue from Karma sales since December 2011." http://media.fiskerautomotive.com/global/en-us/Media/PressRelease.aspx?mediaid=678&title=fact-sheet-fisker-karma-and-fisker-automotive
          Nick
          • 2 Years Ago
          @Letstakeawalk
          Wow, that would be great. But I'm pretty sure R&D and the expenses incurred in the years prior to launch are a lot higher. $100m in revenue is not equal profit........I suspect that's closer to $20m. They'll need to sell tens of thousands to get there (to break even), and I keep my fingers crossed!
          Nick
          • 2 Years Ago
          @Letstakeawalk
          Wow, that would be great. But I'm pretty sure R&D and the expenses incurred in the years prior to launch are a lot higher. $100m in revenue is not equal profit........I suspect that's closer to $20m. They'll need to sell tens of thousands to get there (to break even), and I keep my fingers crossed!
          Nick
          • 2 Years Ago
          @Letstakeawalk
          Wow, that would be great. But I'm pretty sure R&D and the expenses incurred in the years prior to launch are a lot higher. $100m in revenue is not equal profit........I suspect that's closer to $20m. They'll need to sell tens of thousands to get there (to break even), and I keep my fingers crossed!
        Letstakeawalk
        • 2 Years Ago
        @Nick
        Henrik has said that the Karma is already self-sustaining.
          Spec
          • 2 Years Ago
          @Letstakeawalk
          Henrik has said a lot of things that didn't turn out to be so truthful. I'd take his statements with a grain of salt.
          Nick
          • 2 Years Ago
          @Letstakeawalk
          Define 'self-sustaining'.
          marcopolo
          • 2 Years Ago
          @Letstakeawalk
          Spec, 'Lies' is a little harsh. Sales estimates and production dates are a little like some advertising, more expectation, and aspiration than factual statements! You can't interpret these things too literally! When a candidate proclaims that he is certain to win the next election, when he has no real chance, it's not taken as a 'lie', but as part of the electioneering process. Asking people to be grimly realistic, with no margin for optimistic enthusiasm, may produce more accuracy, but very little fun or excitement!
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