Fisker, feeling bad Karma

It’s been just two weeks since battery maker A123 (AONE) was bailed out by Chinese green industrial investor Wainxiang, and now pressure is mounting on OEM Fisker.  Most investors had already written AONE equity off and fewer and fewer were willing to play in its debt, is Fisker in this boat now?  While the company is trying to complete a $500 million fundraising round to generate some forward momentum.  So far they have raised $392 million but are now hitting push-back from investors and the US government has cut off the DOE loan balance.  Top it off, they company just announced a recall of 1,000 of its $100,000 Karma — that’s the total production to date. Bad karma, or bad planning?

Since inception, Fisker has raised more than $1 billion in capital from private investors as it tried to move from limited contract production for the Karma (Valmet) to volume production of it’s Nina at GM’s former Saturn plant in Wilmington DE.  Fisker’s initial pitch was that it could develop and start production much cheaper than traditional automakers as it planned to share costs with suppliers.  Well, obviously , the suppliers haven’t agreed, and the plans for the Nina have ground to a halt as the company tries to raise capital to start the lines running.

With high-profile political bombs like Solyndra and Solar City, coupled with the collapse of AONE, the US DOE has also cut off the remaining $336 million of its $529 million “alternative energy loan” to Fisker.  The company drew $193 million in 2011 but has not had access since May of this year when it was clear they had failed to meet profitably requirements on the loan.  At the same time, taxpayers and candidates have made a target out of non-performing green grants.

Fisker’s initial plan was to reach 15,000 units of the Karma in 2011.  The company delivered 1,000 units from the car’s December 2011 launch through the end of June 2012.  Expectations for full year 2012 are between 2,000 and 3,000 for the year, a far cry from the 15,000 target and well below it’s “breakeven” level of 5,000.

Given the desire of the company to get Wilmington running to get volume on the Nina, which is designed to sell in the $40-50,000 range, capital is needed quick if they are to survive.

To get the Nina up and running, the company is likely being too conservative again.  As a rule of thumb, from development to production run of a “normal car” runs in the area of $1 billion for a new platform, and this is a totally new car with a totally new factory —  $400 million is beyond tight.  While Fisker’s goal of partnering with suppliers was interesting, post 2009-crises and amid the collapse of companies like AONE, it’s not a realistic strategy.

Bottom line: 

This is not the last call for cash, expect more fundraising by end of year, they will need it if they make it that far, probably another $150-$300 million.

I’ve head some rumors of an IPO in 2013. Seriously…..who’s trying to dredge up investors with hope of a quick flip on IPO, not likely, not advisable.

Expect to hear about the outstanding DOE loans in the run-up to the November US elections.

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