Henrik Fisker is one of several current and former Fisker Automotive executives who will be asked to testify before the House Oversight Committee.
Lawyers for Fisker Automotive are putting the final touches on paperwork that could put the company into Chapter 11 bankruptcy protection within a matter of days, according to numerous sources in and outside the fast-fading battery-carmaker.
The move appears to be coming under pressure from the Department of Energy which is hoping to recoup more than $200 million in government-backed loans it initially provided to help spur the development of Fisker’s plug-in hybrid technology. The automaker has faced increasing turmoil in recent months and last week terminated three-quarters of its 160-member staff.
The news is causing turmoil in Washington, where the DoE automotive loan program has long been criticized by Republicans. House GOP members are planning to press into Fisker’s problems with hearings by a key oversight committee later this month, with Fisker founder Henrik Fisker and current CEO Tony Posawatz reportedly among those being called to testify.
Rumors of bankruptcy have circulated for months as it has become increasingly clear that Fisker Automotive was running out of cash. The maker had put all of its U.S. employees on unpaid furlough a week before the mass firings – the sudden elimination of more than 100 staff itstriggering a federal lawsuit filed in suburban Los Angeles.
According to the company, it had just $30 million in cash left as of last week, though it expected to receive another $15 million as part of a settlement with its battery supplier, formally known as A123 before its own bankruptcy.
But by various accounts, including those of Henrik Fisker and CEO Posawatz, the maker has burned through more than $1.2 billion in private capital it has raised, as the more than $200 million the DoE had previously released before closing off access to the rest of an original $529 million loan.
“There are likely going to be some serious questions about what happened to all that money,” one deeply placed source told TheDetroitBureau.com. That could happen at a variety of levels. In fact, there are some observers intimating that the investigation of the Fisker fiasco may just be starting.
The Energy Department appears to be most immediately concerned with getting back its loan money – and as quickly as possible. “They want to basically force the issue,” Reuters quotes a source close to the talks. “They want to get it in the past so that the next DoE secretary doesn’t have to deal with it,” the source added, noting the departure of Steven Chu, who oversaw the loan program while the department secretary during the first term of President Barack Obama.
As it now stands, the carmaker was due to pay back $10 million to the DoE on April 22. How it would have to handle things after filing for Chapter 11 remains uncertain.
So does the question of assets. “They don’t have much,” a source familiar with the Fisker books warned TheDetroitBureau.com.
There are some unsold, $103,000 Fiska Karma sedans and intellectual property related to its development. There appears to be far less from the maker’s second product program. The smaller, less expensive plug-in hybrid was supposed to move Fisker more into the mainstream once production began at an old General Motors plant in Delaware.
But efforts to tool up the factory were put on hold more than a year ago and development of the Atlantic itself was effectively short-circuited by cash problems, engineers spending much of their recent employment “playing videogames,” according to an insider.
Those were likely factors that convinced several potential bidders, including China’s Zhejiang Geely, to back out of negotiations a month ago.
Losing money on another failed venture funded by the DoE could prove a political headache for the Obama White House, especially after the collapse of the once-promising solar panel maker Solyndra, and then the failure of A123.
In a statement last week, a DoE spokeswoman asserted that, “Despite Fisker’s difficulties, our overall loan portfolio of more than 30 projects continues to perform very well, and more than 90 percent of the $10 billion loan loss reserve that Congress set aside for these programs remains intact.”
Ironically, one of the criticisms leveled at the program has been that after approving an initial flood of deals, Energy Dept. authorities backed down under political pressure and left other promising ventures, such as San Diego-based Next Auto, without the funds they were counting on to get off the ground.
Despite the Energy Dept.’s optimism, Republican leaders appear set to further attack the 2009 measure – and general White House support for renewable-energy programs. And the Fisker failure will give them a good opportunity. According to reports, three senior Fisker executives, current and former, will be called before the House Oversight and Government Reform Committee later this month, along with an official from the DoE.
By that point, it will likely be clearer whether Fisker will fall into bankruptcy or find a much-needed White Knight. Few familiar with the maker’s collapse expect the latter to happen.