Fisker Automotive may be going the way of Solyndra

Posted by PITHOCRATES - April 28th, 2013

Week in Review

The Obama administration bet big on Fisker.  Sure that they could make the green car the Obama administration envisioned.  An upscale sportier version of Government Motors’ (GM) Chevrolet Volt.  Which isn’t selling well.  But it is selling better than the Fisker Karma.  But that isn’t saying much (see Floundering Fisker faces grilling over U.S. government loan by Deepa Seetharaman and Ayesha Rascoe posted 4/24/2013 on Reuters).

Fisker Automotive Inc, which has not built a vehicle since July, has the potential to succeed and repay nearly $200 million in government loans if the “green” car maker is able to find the right “financial and strategic resources,” according to former CEO Henrik Fisker.

Problems with the parts suppliers, delays in regulatory approval and recalls of its flagship Karma plug-in hybrid sports car were among the issues that dogged the automaker over the last few years, Fisker plans to tell lawmakers during a congressional committee hearing later on Wednesday…

The hearing comes as the automaker verges on collapse. Among the key questions is whether Fisker’s prospects were strong enough at the start to warrant the DOE’s backing, which helped trigger a flood of private financing for Fisker.

Fisker’s failure to make a payment on the DOE loan on Monday is the latest of its troubles. In recent weeks, Fisker has fired 75 percent of its workforce and hired bankruptcy advisers…

The DOE’s early public support helped open doors for Fisker, which sells the $100,000-plus Karma plug-in hybrid sports car. Fisker has raised $1.2 billion in private funds to date, according to SEC filings…

Fisker never received the full $529 million loan. It tapped $192 million before the DOE quietly decided to freeze Fisker’s credit line in June 2011 when it became clear that Fisker would not meet performance milestones as part of the loan agreement…

In the confidential “information statement” sent to shareholders in December 2011 and obtained by Reuters, Fisker said it “will not meet certain financial covenants and project milestones” required in the DOE agreement, including earnings, net worth and certain financial ratio targets.

Fisker’s troubles come after a string of green technology flops, including last year’s bankruptcy of Fisker’s lithium-ion battery supplier, A123 Systems.

Forecasts in 2009 for the sale of hybrid and electric vehicles far outstripped subsequent demand.

Forecasts outstripped subsequent demand?  Hmmm.  Let’s see if we can figure out why demand is weak for the Fisker Karma plug-in hybrid sports car.

The Fisker Karma is a luxury sports sedan.  A 4-door.  With room for 4.  Because of the large battery that runs down the middle of the car providing room only for 4 bucket seats.  Making this a subcompact.  And what range does that massive battery give you?  About 32 miles.  After that you’re running on gasoline.  Which can take you to a top speed of 125 mph.  And can go from 0 to 60 mph in 6.3 seconds.  This is what you get for $100,000-plus.

Now compare that with a Chevrolet Corvette.  A 2-door, 2-seat sports car.  With a top speed of 190 mph.  And can go from 0 to 60 mph in 4.2 seconds.  So if you’re going through a mid-life crisis and want something to impress the ladies with you can get all of this for about $50,000.  And they can’t understand why actual demand outstripped their forecasts.  Here’s a guess.  You can get a lot more car for less elsewhere.  If driving electric is more important you’ll probably buy one of the tinier hybrids and save yourself about $50,000.  If speed and power is more important to you you’ll probably buy something like a Chevrolet Corvette.  And save yourself about $50,000.

This is the problem with electric cars.  You get so little car for what you have to pay that only the most wealthy and diehard environmentalists are going to shell out that kind of money.  And there just aren’t a lot of those out there.  Which is why private investors didn’t invest.  Until, that, is, the federal government invested.

Once the government chose to subsidize Fisker then private investors found their courage to invest, too.  Figuring that with the government assuming some of the risk their investment was now less risky.  As they probably saw the future where a bunch of rich Hollywood types would have a Fisker in the garage.  To take out on special occasions.  To show that they cared.  But there were so many problems bringing this car to market that even the government bailed on it.  And for them to do that you know that there must be problems at Fisker.  Making these private investors rue the day they followed the government into this company.  Instead of staying out of it based on their original analysis.

Any company that has something to sell that the people want doesn’t need government money.  For if private investors see a good thing they will invest.  But when they don’t the government does.  Because no wise investor will.

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