Fisker Lay-offs and loans issues?

[jeroen]

Has anyone read this?
http://www.autoweek.com/article/20120206.../120209913

does not sound good to me...

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With federal loans blocked, Fisker halts work on Project Nina, lays off 66 workers
By Amar Toor posted Feb 7th 2012 7:26AM

Fisker Automotive's bumpy 2011 appears to have given way to an even rockier 2012. A little more than a month after recalling 239 of its Karma plug-ins, Fisker has now stopped working on its second electric vehicle, following the US government's decision to suspend its federal loans. The manufacturer confirmed the news in an email yesterday, adding that a total of 66 workers in Delaware and California have been laid off, as a result. In 2009, the Department of Energy provided Fisker with $528.7 million in federal loans, but according to spokesman Roger Ormisher, access to those funds have been blocked since May. The money was supposed to be used to launch the Karma and Fisker's second, US-manufactured EV, known as the Nina. The Karma began rolling out to market in July, but did so well behind schedule, spurring the DOE to suspend its loan.

"Our loan guarantees have strict conditions in place to protect taxpayers," Department spokesman Damien LaVera explained in an email to Bloomberg. "The department only allows the loan to be disbursed as the company meets certain milestones and demonstrates results." Thus far, Fisker has drawn on only $193 million of federal funds and is looking to renegotiate the terms of the loan, in the hopes of accessing the remaining $336 million. The DOE, however, is still under intense scrutiny because of September's Solyndra debacle, so it's difficult to say what a renegotiated deal would look like. The manufacturer, for its part, says it's taking no risks, telling GigaOM that it "continues to pursue alternative funding sources." In the meantime, it'll continue to focus on the Karma for 2012, and hopes to revive Project Nina at a later date.

on Engadget

[Karma31]

Every cloud has a silver lining. Fisker will no doubt focus more of it's efforts on getting the Karma sorted out and established in the market place. It's an incredible work of art and technology that needs just a bit more TLC to be considered one of the world's greatest automobiles.

[ffcars]

Oh no, this is not good. What does that mean to their cash flow and dealer/customer support?

Are we all buying cars that could leave us stranded without parts; let alone a warranty.

[Sparky168]

(02-08-2012 01:58 AM)ffcars Wrote:  Oh no, this is not good. What does that mean to their cash flow and dealer/customer support?

Are we all buying cars that could leave us stranded without parts; let alone a warranty.

It is a natural and a responsible action that Fisker took. It stopped the Nina development until the DOE loan, destined for the Nina project, got clarification. Wouldn't you do the same, if your business case is based on the DOE loan? When DOE shuts the tap, you stop that project.

Karma production is not affected as reported by some. Zero, no change.

[Dave_Car_Guy]

Not an issue, it seems, since they haven't had any access to that loan money since May of last year, according to the story:

"To date we have received $193 million of the $529 million Department of Energy loan, mostly for the Karma program, and received our last reimbursement in May 2011"

...so obviously they have been managing without the loan, and it explains why we saw the story about them raising more equity at the end of the year. The remainder of the loan appears to be for the Nina program, so that will be up to the DOE if they want to see that come to life sooner rather than later. Not an issue for Karma owners, IMO.

[metalica23]

(02-08-2012 02:53 AM)Dave_Car_Guy Wrote:  Not an issue, it seems, since they haven't had any access to that loan money since May of last year, according to the story:

"To date we have received $193 million of the $529 million Department of Energy loan, mostly for the Karma program, and received our last reimbursement in May 2011"

...so obviously they have been managing without the loan, and it explains why we saw the story about them raising more equity at the end of the year. The remainder of the loan appears to be for the Nina program, so that will be up to the DOE if they want to see that come to life sooner rather than later. Not an issue for Karma owners, IMO.

Just because they've been burning through cash since May 2011 with no issue, doesn't mean that they won't run out tomorrow. No one here knows Fisker's finances, do they? If so, please share! I hope this is just a bump in the road and not a nail in the coffin. I'm also guessing this doesn't just set back the Nina, but the Sunset as well? If they don't develop the more affordable Nina (sooner than later), can they survive on Karma sales alone?

BTW, is it 66 (post) or 26 (article) workers?

[dennis]

(02-08-2012 04:29 AM)metalica23 Wrote:  Just because they've been burning through cash since May 2011 with no issue, doesn't mean that they won't run out tomorrow. No one here knows Fisker's finances, do they? If so, please share! I hope this is just a bump in the road and not a nail in the coffin. I'm also guessing this doesn't just set back the Nina, but the Sunset as well? If they don't develop the more affordable Nina (sooner than later), can they survive on Karma sales alone?

BTW, is it 66 (post) or 26 (article) workers?

It was 26 workers in Delaware and 40, mostly engineering contractors, in Anaheim. No doubt most if not all were working on the Nina, which they are delaying while working out the issues with the DOE loan. I don't know if anybody remembers, but the Fed's had them accelerate the timeline and work on the Nina as a requirement to get any DOE money, so they may just be returning to their original plan and timeline.

Fisker closed on $110M of additional funding in late 2011. Here is the link to their SEC filing on 1/9/12: http://www.sec.gov/Archives/edgar/data/1...ry_doc.xml

This was on top of $66M they closed the month before, and $67M they raised in Fall 2011. That's $243M in capital raised during the second half of 2011. I don't know what their burn rate is, but I guesstimate that with 600 employees it is about $10M/month. On top of that there are cash needs to fund inventory, which I have no way to estimate.

With $243M raised recently, they aren't going to run out of money soon, but we have to assume they will need to raise more money. The big question for us as customers is, will they be able to get it?

My answer is a resounding "Yes"! Having been early in 3 startups, 2 of which went public, I was privileged to have a front row seat for this process. First off, no matter how good the company, the first product ALWAYS has problems, sometimes significant ones. What the investors are looking for is:

1) Is there a big market?
2) Is there demand for the product?
3) Can the team that is in place (or being augmented as we saw late last year) solve the problems and grow the company?

I don't think there is any controversy on the forum about the first two. On the third question, Fisker has some time to get the early product issues with the Karma resolved before they are under the gun to find more cash. Reducing headcount 10% helps to lengthen that runway.

So my bet is that they will attract the additional capital they need. Even if they don't get new investors, some or all of the current investors will put up more funds to protect their investment. And there is an ugly process referred to as a "cramdown" that washes out those investors who are unwilling to cover their pro rata share of the new funding. The result is a bigger piece of the pie for those that provide the follow on funding, so the incentive is there to re-up.

Most of us are willing to give them time to fix the electronics issues because the car is stunning and the hybrid drivetrain works. That's a lot different than Think, where there was no demand for an ugly car that didn't go very far. This will not be lost on investors. Contrary to some folks' belief, most of them are very smart. You just have to take on a lot of risk in order to make a lot of money.

If you made to the end, thanks for putting up with my rambling.

- Dennis

[Fabulist]

(02-08-2012 06:08 AM)dennis Wrote:  If you made to the end, thanks for putting up with my rambling.

- Dennis

^^^^ Dennis: Very well stated and exactly on point. I would think that there is no shortage of new investors who want to invest in Fisker today, and the DOE loan may have in fact become more trouble politically than it is worth. The decision not to build a bespoke factory and to go with an OEM manufacturer has proven to be exactly the right one and I think the company is making other prudent decisions both on the financial and technical fronts.

-- Fab.

[metalica23]

(02-08-2012 06:08 AM)dennis Wrote:  2) Is there demand for the product?

Are we talking just Karma here, or overall? For the Karma, while I'd say there are a select few that are passionate about the car (present company somewhat included), it doesn't seem to have the same pent up demand that I was expecting. I thought it might be that when these cars were finally produced that non-deposit holders would have a long wait in front of them. Turns out my 2 year deposit didn't get me much. As a matter of fact, my dealer has two sitting on the lot right (for a coulpe weeks now) that I could buy, instead of waiting for mine to show up in May! That's very disheartening...

[kabalah70]

And how many cars have been delivered? Each one adds to the revenue coming in.