Fisker, a U.S. based domestic producer of luxury plug-in hybrid vehicles, is reportedly contemplating bankruptcy:
Fisker Automotive, the U.S.-backed maker of luxury plug-in hybrid sports cars, has hired law firm Kirkland & Ellis to advise it on a possible bankruptcy filing, a source said March 29, while executives continue their search for a strategic investor.
The company, based in Anaheim, Calif., furloughed its U.S. work force this week to preserve cash.
Anup Sathy, a bankruptcy lawyer at Kirkland who handled the Chapter 11 filings of General Growth Properties and Innkeepers USA Trust, is advising Fisker, the source said.
On Wednesday, two sources said the company was considering bankruptcy while it pursued alternatives.
All of the sources declined to be named because the matter is not public.
A Fisker spokesman declined to comment. Neither Kirkland & Ellis nor Sathy were immediately available to comment.
Fisker, which makes the $100,000-plus Karma plug-in hybrid, has not produced a car since July and is seeking a financial backer to help finish the development of a second plug-in hybrid, the Atlantic, and produce it at a Delaware plant.
The company’s cash crunch comes less than a month before it must make a payment on a U.S. Department of Energy loan that Fisker received in 2009. Fisker declined to divulge the amount of the payment, which is due April 22.
Why were we subsidizing a company who planned to build a car that would cost over $100,000 in the first place?
Fisker’s struggles have been long-documented. In February of 2012, Fisker failed to meet vehicle production and sales quotas that were agreed to in a loan contract with the Department of Energy. It then laid off 26 workers at a plant in Delaware, while continuing to produce vehicles overseas.
After Fisker’s inability to meet sales and production quotas, the Department of Energy refused to release additional funds to Fisker, having already given them $169 million out of $528 million:
DOE had agreed to loan Fisker $528 million. Fisker already has drawn $169 million to pay the California engineers and others involved in developing the Karma. It is built in Finland, which raised some eyebrows about U.S. taxpayers’ money supporting, indirectly, an overseas manufacturing operation. Ormisher says more than 50% of Karma’s parts are from the U.S. and it was designed and developed in California.
Well yes, this might raise some eyebrows. Many U.S. citizens ponder the wisdom of allowing the government to handout millions of taxpayer dollars in order to attempt to produce certain technologies or revitalize our manufacturing sector. Certainly many more would be skeptical of the U.S. government handing out millions of taxpayer dollars to allow companies to produce these same technologies outside of the United States.
As Resourceful Earth readers know, this is hardly the first company to receive funds from the Department of Energy and then enter or consider bankruptcy proceedings. Here are many more.