How the Wheels Came Off for Fisker
May 1, 2013
One year ago, one of the highlights of any electric car aficionado's garage would have surely been the Fisker Karma, a $100,000 plug-in hybrid electric car with great aesthetic beauty. But for all its beauty, the car is riddled with software errors, design flaws and malfunctioning parts. Fisker, like many other companies that received U.S. loans for green-friendly initiatives, is on the brink of failure, says the Wall Street Journal.
- Many buyers of the high-priced vehicles have demanded refunds as stagnant gas prices have simultaneously reduced demand for electric cars.
- Fisker, based in Anaheim, California, recently missed a loan payment and has already dismissed most of its staff and hired bankruptcy lawyers.
- Only a last-minute rescue could save Fisker from failing like other automobile upstarts like DeLorean Motor Co. or Tucker Corp.
The failure of Fisker represents yet another example of the federal government's poor ability to pick winners and losers in the private market, particularly with firms that seek to limit fossil fuel use.
- Originally, Fisker planned on starting small in Finland but the U.S. government convinced the company to think bigger and bring the operation to the continental United States.
- At the height of its fundraising, Fisker was one of the largest U.S. venture capital backed companies ever with more than $1 billion raised from private sources and more than $529 million in loans from the U.S. government.
- The loans were made with the understanding that the U.S. government would help fund the development of the Karma if the company developed a lower cost model.
The fuel spike and global cash crunch that occurred in 2007 helped lure investors to Fisker's luxury plug-in company, which received $450 million more in loans than did rival Tesla Motors. Even with the enormous amount of funding available, the Fisker Karma had plenty of problems with its suppliers, software and meeting regulatory requirements.
- In early 2011, the Obama administration froze disbursements to Fisker after the Solyndra scandal, and in fall of 2011 Fisker notified its battery supplier that it could not take deliveries because it was out of cash.
- In July of 2012, the company stopped production to renegotiate a cost-saving contract and has not produced a car since.
Source: Yuliya Chernova and Mike Ramsey, "How the Wheels Came Off for Fisker," Wall Street Journal, April 24, 2013.
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