The pre-mortum is under way as Fisker Automotive seems to be on a collision course with bankruptcy.
More bad news came last week when the California company laid off nearly four-fifths of an already diminished staff. Operations of the company had been shut down in Delaware long ago, after the federal government suspended a loan to be used to roll out a hybrid mid-sized vehicle at the former GM Boxwood plant.
Recently, founder Henrik Fisker departed, stopping off to buy a Fisker Karma, a luxury hybrid that has not been built in month.
The State of Delaware contributed more than $20 million to the financial package and would become one of Fisker’s many creditors should the company head to Chapter 11.
The news of Fisker’s woes was met with near glee in some circles.. You might remember that the company was seen as an example of the government picking winners and losers in the presidential campaign.
The reality is more complex. Congress passed legislation calling for funding of vehicles using alternative technologies under the Bush administration. Fisker built the Karma luxury coupe in Finland in preparation for using the proceeds of the federal loan to build a mid-sized car at Boxwood. That too drew plenty of heat. A long and insightful article in the Car Connection website outlines the story of an underfunded car company aided by some influential friends and a loose interpretation of the alt car legislation.
In the aftermath of the near collapse of the financial system in 2008 and the closing of the state’s two auto plants, the administration of new Gov. Jack Markell responded quickly when Fisker emerged as a possible savior for the Boxwood plant.
Only later would we learn that buyers did not beat a path to the door of Fisker for a combination-electric-gas vehicle that was sexy, but heavy, thanks to the array of batteries. While it had green credentials, the Karma was not a pure play in alternative energy, with its gasoline engine and mileage that was not all that impressive on long trips. The vehicle runs on electric only during short commutes.
It was also beset by problems ranging from batteries and fires to simple bad luck when a shipment was destroyed on the Jersey docks by Hurricane Sandy. And let’s not forget troubled pop star Justin Bieber, who had his Fisker chromed and got into a couple of scrapes with the law.
By contrast, another California company, Tesla, sailed through the process, aided by the resources of its billionaire owner., Elon Musk. Tesla builds an all electric car that Bieber did not lust after. Sales have not sizzled, but the company is reportedly on the verge of a profit. By the way, the Delaware travel oasis on I-95 has an electric charging station for Teslas. Musk seems to have a deft touch in business as witnessed by his ownership of a private company that shuttles payloads to the manned space station.
Fisker and Tesla are battling other auto makers that are squeezing more miles per gallon out of existing engines and gas prices that have not quite crossed the $4 mark. And when the government funded alternative vehicle programs, it was likely companies would lose out in the marketplace. One of those losers is likely to be Fisker. The lesson for Delaware is that some deals are simply too risky, although simply letting the industry die without a fight was not going to happen. Critics were few when the Fisker deal was announced. We should also remember that Markell administration has pursued a number of deals that are far more promising.
The Delaware City Refinery investment is a success and Bloom Energy reportedly has a backlog of orders as its plant near Newark heads toward completion. Bloom remains a mystery in some ways, but unlike Fisker has a strong record when it comes to the reliability of its fuel cells. A host of other deals have also been done involving both small and large businesses. The most recent could bring a new poultry processing plant in Sussex County that will employ 700.
In the end, it would have been better if Fisker had not been an option. But it was a risk that at the time was worth taking. – Doug Rainey