Subject: Fisker Seeks Federal Loans to Build a Car in Delaware - NYTimes.com
From: "Eric Schwerin" <[email-masked]>
To: "Hunter Biden" <[email-masked]>
Date: Tue, 3 Apr 2012 22:20:32 -0400

http://www.nytimes.com/2012/04/04/business/fisker-seeks-federal-loans-to-build-nina-in-delaware.html

Seeking U.S. Loans for Plant, Fisker Scrambles to Restore Credibility

DETROIT — Fisker Automotive’s huge assembly plant in Delaware stands vacant, waiting for the money, equipment and workers to make a new plug-in hybrid electric car backed by loans from the federal government.

But whether Fisker, a start-up based in California, ever builds vehicles in the United States is anyone’s guess.

After several setbacks — including defective battery packs in its first model and the Energy Department’s decision last year to suspend loans to the company — Fisker is desperately trying to re-establish its credibility as an independent automaker with cutting-edge technology.

The company has hired a new chief executive, the former Chrysler chief Tom LaSorda. This week, it disclosed in a Securities and Exchange Commission filing that it had finished raising an additional $392 million from private investors, giving it more than $1 billion in equity.

And on Tuesday night, Fisker’s top executives showed journalists in New York a prototype version of the car that it hopes to build in Delaware. The first showing of the car, the Fisker Atlantic, was aimed at convincing skeptics that the company has staying power, and at persuading the Energy Department to resume the loans critical to Fisker’s future.

The company’s co-founder and chairman, Henrik Fisker, showed the Atlantic, a sportier, smaller model than the Karma that will be priced in the $50,000 range. And although Mr. Fisker alluded to the Karma’s “difficult journey” in getting to market, he said the company was committed to building the Atlantic. “We want to make it very clear,” he said. ”This car will be built and will be going into production.”

Roger Ormisher, a Fisker spokesman, said the company is pursuing two lines of financing, one with the Energy Department and one with private investors.

Fisker borrowed $193 million of the $528 million allocated by the federal government before its loans were suspended last May. The company used the first portion of the money to finish development of its $108,000 Karma plug-in sedan, which is manufactured at a plant in Finland and has attracted people like Colin Powell and Justin Bieber as early owners.

But the Karma missed government deadlines to receive the rest of the money, putting Fisker’s second model in jeopardy.

Fisker needs hundreds of millions of dollars to equip and staff the Delaware plant, which was previously owned by General Motors.

While it tries to negotiate a resumption of the federal loan program, Mr. Ormisher said, Fisker is in a push for private financing as well. Industry analysts said the company’s troubles were not unexpected, given the enormous resources needed to introduce an all-new model that runs primarily on battery power.

The Karma has already faced one safety-related recall and the embarrassment of a complete breakdown of a model being tested by Consumer Reports magazine.

Last month, the manufacturer of the Karma’s lithium ion battery, A123 Systems, said it had discovered defects in battery packs made in its plant in suburban Detroit. A123 is now building replacement batteries for Karmas now on the road.

The shutdown of the Karma in the Consumer Reports test prompted the company to hire Mr. LaSorda.

His first action was to notify Fisker customers that a team of 50 engineers was tackling its battery problems. At the same time, he defended how the Karma’s computerized systems had shut down because of technical problems in the Consumer Reports test car.

“The Karma performed exactly as it was designed to,” Mr. LaSorda said in a letter sent to more than 600 Karma owners. “The onboard diagnostics detected a fault and entered a protection mode that shut the car down to protect other components.”

Fisker has since said it will upgrade its customer service program and offer free battery replacements and an extended warranty of up to 60,000 miles.

Joseph Phillippi, an executive with the consulting firm AutoTrends, said Fisker clearly had some significant hurdles to overcome.

“Can they make it? Nobody really knows,” he said.

The Karma’s rocky start led to the cutoff of the company’s federal funds last year and cast a pall over the entire automotive energy loan program. No loans under the program have been made by the Energy Department since then, and several companies have withdrawn their applications this year because of tightened guidelines for the program, which Congress created in 2007 to encourage the development of fuel-saving technologies.

The bankruptcy of the solar company Solyndra last summer also hampered the efforts of auto loan applicants, according to executives of firms that have dropped their applications.

The Fisker story underscores the difficulty a start-up has in competing with major automakers in the fledgling electric-car market.       

For example, the Karma uses technology similar to that used by G.M.’s Chevrolet Volt, which is still struggling to gain acceptance in the mass market, Mr. Phillippi said. “When you look at the amount of money and resources G.M. put into the Volt since 2006, you have to wonder if a small company like Fisker is ready for prime time,” he said.

Fisker’s main private backer so far has been the Silicon Valley investment firm Kleiner Perkins Caufield & Byers.

Mr. Ormisher, the Fisker spokesman, said new investors he declined to identify had committed to join the latest round of financing. However, he added that Fisker did not yet have enough money to begin equipping and staffing the plant in Wilmington, Del., where it hopes to build the Atlantic.

“We were late to market with the Karma and it cost us,” he said. “But we are still hopeful we can reach a settlement with the D.O.E., because obviously it’s going to take a few hundred million dollars to start manufacturing in Delaware.”

Brian Selander, a spokesman for Gov. Jack Markell of Delaware said the stalled plans had been “a source of a great deal of frustration” in Wilmington.

Nick Bunkley contributed reporting.

Eric D. Schwerin
[email-masked]

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