Henrik Fisker is unveiled with the Fisker Ocean electric vehicle at the Manhattan Beach Pier ahead of the Los Angeles Auto Show and AutoMobilityLA on November 16, 2021 in Manhattan Beach, California.
Patrick T. Fallon AFP | Getty Images
Fisker on Monday became the latest all-electric vehicle startup to file for Chapter 11 bankruptcy protection amid sluggish consumer demand, severe cash burn and operational and product issues.
The writing has been on the wall for a while for investors, with Fisker expressing concerns in February about his company’s ability to continue growing, prompting its charismatic founder and CEO Henrik Fisker to Henrik Fisker disappeared from social media and the spotlight.
It’s the latest in a series of electric vehicle companies to collapse. Fisker joins other SPAC-backed companies such as Proterra, Lordstown Motors and Electric Last Mile Solutions in filing for bankruptcy. Others such as Nikola and faraday future The company remains open but shares are trading below $1 a share due to operational challenges, missed targets and broader industry headwinds.
It’s also a bit of déjà vu, as it marks the second time that Henryk Fisker’s car company (both bearing his last name) has filed for bankruptcy protection.
The new filing comes after the automaker was unable to secure investment from a major automaker to keep itself afloat. About four years ago, Fisker announced plans to go public through a reverse merger with a special purpose acquisition company backed by Apollo, valuing the company at $2.9 billion. The deal injected more than $1 billion in cash into Fisker.
Like many other companies at the time, Fisker was driven by low interest rates and Wall Street’s bullish sentiment toward electric vehicles after the rise of the U.S. electric vehicle leader Tesla.
“They looked at Tesla’s success and found that Tesla was more of an anomaly than a role model,” said Sam Abuelsamid, principal research analyst at Guidehouse Insights.
But consumer adoption of electric vehicles has been slower than expected, costs have risen, and investor interest in electric vehicles other than Tesla has dried up. The company also faces major operational issues and the launch of its first product, the Ocean SUV EV.
Software focus
When it went public via a special purpose acquisition company in 2020, Henrik Fisker compared the company to U.S. electric vehicle leader Tesla and touted its production relationships with Canadian auto suppliers Magna to that apple and Foxconn.
Unlike most of its peers, the automaker contracts with third-party manufacturers to build the Fisker Ocean crossover. As Fisker described it, the partnership with Magna was supposed to be an “asset-light” strategy, allowing the company to conserve cash and focus on differentiating technologies like software.
Abusamid said such tactics are not inherently bad, but he called the company’s management incompetent and specifically blamed the company’s CFO and COO (and Henrik Fisk’s wife) Gita ·Gupta-Fisk.
“This approach can work,” he said. “I underestimated that the problem in the Fisker case was … the incompetence of senior management.”
The company, which burned through cash, recalled thousands of Ocean SUVs in North America and Europe last month due to vehicle software issues.
According to its Chapter 11 filing, the company owes millions of dollars to software and engineering companies such as adobe, SAP USA, ManpowerGroup and Prelude systems, etc. CNBC parent company NBCUniversal is also listed as the largest creditor.
“(The auto industry) is capital intensive. You’re trying to match production to consumer demand, and when they have any problems with their vehicles, you have to allocate funds for that,” said Stephanie Vardy, director of Cox Automotive. Stephanie Valdez Streaty said. “Also, when they don’t have other revenues like (internal combustion engines) to fund it … that makes it very challenging.”
Its operating unit, Fisker Group Inc., has estimated assets of $500 million to $1 billion and liabilities of $100 million to $500 million.
Late last year, Fisker $530 million in inventoryas it sold only 4,700 of the more than 10,000 Ocean EVs produced in 2023.
Already seen
For renowned car designer Henrik Fisker, best known for his work on the BMW Z8 and Aston Martin DB9, it’s a feeling of déjà vu.
His first, eponymous company, Fisker Automotive, filed for bankruptcy protection in 2013, shortly after leaving the company. Talk later Sold its assets to China’s Wanxiang Group for $150 million.
Things should be better the second time around for the founder, who says he has learned from past mistakes with former bankrupt companies.
“Having done this before, I’m in a unique position to almost learn from it, which is very rare, especially in the automotive industry,” he said 2017 saysone year after the new company was established.
But the similarities between the two failed companies are hard to ignore.
Both companies came with a lot of hype, mainly from Fisker himself claiming they would revolutionize the industry. They are driven by “free” money – first the federal funds and more recently Wall Street – on the premise that “green” or electric vehicles are the future of the auto industry.
Both also faced serious quality issues, leading to recalls. In 2011, the first Fisker’s Karma was recalled due to battery safety issues and fire risk.
Both companies also changed direction and priorities several times.
The second Fisker switched to a dealer-based distribution model in January after delivering less than half of the more than 10,000 cars it produced through a Tesla-like direct-to-consumer approach.
One key difference this time: With the failure of the second Fisker, it was investors rather than U.S. taxpayers who were wiped out. Henrik Fisker’s first company gets a boost from $529 million in federal loans ($139 million of which government lost), the second is funded through Wall Street’s optimism about SPAC and EV. Its shares were delisted in April.
A Fisker spokesperson said in a statement early tuesday The company is “proud of our accomplishments” but believes Chapter 11 is the best option.
“Like other companies in the electric vehicle industry, we face a variety of market and macroeconomic headwinds that impact our ability to operate efficiently,” a spokesperson said in a release. “After evaluating all aspects of our business Following the election, we determined that proceeding with the sale of our assets under Chapter 11 was the most feasible path forward for the company.”
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