Just how bad were things at Fisker before they ceased production, laid off their staff and got hauled before Congress over all the money they borrowed? Much worse than you might have imagined, according to a new special report from Reuters.
The story from Reuters' Deepa Seetharaman and Paul Lienert goes rather deeply into the company's sad state of affairs. It seems that things began to collapse for Fisker right around the time the U.S. Department of Energy cut them off from further loan money in June 2011.
Fisker had been approved for a $529 million line of credit, but "only" drew down about $192 million.
However, the private investors who put $525 million into the company were not told about this, and instead were reassured with "rosy sales forecasts and assurances the company valued itself at nearly $2 billion," according to the story.
All in all, Fisker never turned a profit and burned through $1.4 billion in private and public funding since its founding in 2007.
The story goes into the engineering problems that plagued the luxury hybrid Karma, apparently out of a desire to stay close to Henrik Fisker's unorthodox design, bad production and ordering practices, poor communication and payment to suppliers, and, it would seem, no clue how to actually make money on a product:
Fisker built an estimated 2,450 Karmas from 2011 to 2012, but lost at least $35,000 on each car, according to internal financial statements and interviews with former Fisker executives. One former executive said the Karma "cost far more to produce than we could ever charge for it."
One has to wonder how Fisker planned to stay afloat with that model besides constant influxes of new cash from investors and the government. Things weren't helped by Hurricane Sandy, which put Fisker out $30 million, or the bankruptcy of their battery supplier A123 Systems.
Not everyone saw potential in the company: one investor who declined to put money into Fisker called the Karma "a rudimentary machine that needed several years of engineering refinement." Ouch.
There were other questionable decisions made too, like inflated salaries for Henrik Fisker and other executives and fancy parties in Monaco even when layoffs were taking place. (Shocking, I know.)
What's really interesting about the Reuters story — and what's most important to taxpayers like you and me — is that it maintains that "investors and government representatives weren't always hearing the same story" when it came to Fisker's finances.
Henrik Fisker told his shareholders in December 2011 that they were on target to launch the smaller Atlantic sedan in 2013, only to shut down production seven weeks later. Fisker also never told the investors that his company had been cut off from government funds months earlier due to having missed their targets.
But when Fisker was faltering, neither they nor the Energy Department bothered to tell anyone.
Neither the Energy Department nor Fisker made that news public until February 2012, when Fisker told reporters that it was "renegotiating" terms of the loan. The department that same month said that it "only allows the loan to be disbursed as the company meets certain milestones and demonstrates results."
Besides Fisker's obvious mismanagement and lack of a clue how run a car company, that last part is what bothered me most. Why didn't we know that Fisker was flagging after taxpayer dollars were invested in the company? Was it a desire to keep Fisker from turning into the next Solyndra, which in the eyes of critics of the Obama administration, it did anyway?
If we've seen anything from the green startup automakers who sought Energy Department loans, it is very, very hard to get a new car company off the ground, let alone make it profitable using new technology. But based on what this story has to say about the way Fisker was run, I have to wonder why they got any money in the first place.
Photo credit AP