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One way or another, Fisker Automotive may soon be off the market
23 September 2013
by Keith Patterson
Two German investors, Ingo Voigt and Fritz Nol, announced their intent to buy Fisker Automotive, the failing plug-in hybrid car company, on 11 September. The team submitted a detailed offer to the US Department of Energy (DOE) along with a letter of intent for restructuring Fisker.
The purchase funds for Fisker would in theory go directly to the DOE since the government agency loaned the auto company a large sum of money before it stopped production more than a year ago. Though the Voight/Nol offer amount has not yet been made public, many predict the company will sell for $25 million to $50 million. However, subsequent to the Voight/Nol offer, DOE announced it would auction off the remainder of Fisker’s loan obligation, “after exhausting any realistic possibility for a sale that might have protected our entire investment.” [See sidebar.]
|DOE auctioning off the Fisker loan|
|On 17 September, Peter W. Davidson, Executive Director of the DOE Loan Program Office (LPO), posted an update on Fisker and DOE’s loan portfolio, and announced that DOE had decided to auction off Fisker’s remaining loan obligation, with initial bid deadline of 7 October.|
|Noting that DOE has issued $8.4 billion in loans to auto manufacturers large and small—part of a much larger portfolio of clean energy loans and loan guarantees—Davidson added that not every investment and every company can succeed in such a competitive environment.|
|DOE will require all bids for the Fisker loan to include a commitment and business plan that promotes domestic manufacturing capabilities and related engineering for advanced technology vehicles in the US.|
|The $192 million disbursed to Fisker represents approximately 2% of the DOE advanced vehicle loans, and barely one half of 1 percent of DOE’s overall loan program portfolio, Davidson wrote.||“Even after accounting for all possible losses on the Fisker loan, expected losses to date only represent about 2% of our overall loan program portfolio of approximately $34 billion—and less than 10% of the loan loss reserve Congress set aside for the program.”|
The DOE offered Fisker Automotive a $529 million loan in 2009 as part of the department’s Advanced Technology Vehicles Manufacturing (ATVM) loan program. (Earlier post.) The program backs automotive companies that offer both green energy initiatives, such as increased fuel efficiency, and new auto industry jobs in the United States.
Fisker’s loan was granted so the company could build an environmentally friendly luxury car called Karma in Finland and later a second vehicle named Atlantic in the United States. Both of these vehicles promised to marry eco-friendly technologies with the high-end style of a Maserati.
To satisfy its agreement to build a vehicle and bring jobs to the US, Fisker used part of the money to purchase a $20-million factory in Delaware that had previously been owned by General Motors.
Not long after word got out about the DOE’s investment, Fisker started raking in funding from private investors. Beyond the government loan, the car company gained more than $600 million for the creation of its vehicles.
Despite the huge influx of cash, Fisker struggled to stay afloat. The company lost about $1 billion between 2008 and 2012, according to a Reuters article. Delays in production and last-minute design changes drove the price to build a Karma much higher than the company could sell them for. According to the company’s financial records, Fisker lost about $35,000 on each of the 2,450 Karmas it built between 2011 and 2012.
|Sen. Thune wants to end ATVM program|
|On 18 September, the Detroit News reported that Sen. John Thune, R-S.D., chairman of the Senate Republican Conference, proposed an amendment to end the $25-billion Advanced Technology Vehicle Manufacturing loan program.|
|“Last month, U.S. Energy Secretary Ernest Moniz told The Detroit News that the agency was considering revising lending criteria and seeking a new round of loan requests. But Moniz said Monday that the Energy Department—which had initially received more than 100 applications for loans in 2008 and 2009—is not actively considering any applications for retooling loans.”|
By June 2011, the DOE decided to halt funding of its loan after persistent delays in production and performance problems from Fisker, it said. In total, the government agency gave Fisker $192 million and only $28 million was paid back. Now Fisker’s assembly plants are idle, awaiting the sale of the company.
If the purchasing company decides to tap the remainder of the DOE’s loan, it would have to commit to building at least some of the vehicles in the United States and establish the 300 permanent jobs as outlined in the original agreement. It’s possible the German investors will use the loan since they plan to move production of the Karma from its Finland location to the United States, according to Green Car Reports.
However, the stipulation is an issue that’s caused other buyers to pull out of purchasing the company. For example, in March 2013, The Wall Street Journal reported that a group of Chinese automakers ended talks of purchasing Fisker over a disagreement on the continuation of the DOE loan.
Fisker Automotive isn’t the only failed automotive company backed by the DOE. On 6 September the department announced a $42-million loss on the loan it awarded to the Vehicle Production Group LLC. The loan of $50 million was awarded to the company so it could build a natural gas-powered, six-passenger handicapped-accessible van.
VPG stopped production of the vans when its finances dipped below the minimum required as a condition of the DOE loan. The government agency was able to recoup $5 million after if froze VPN’s assets. It received an additional $3 million from the sale of the company to AM General, a Humvee manufacturer.
In contrast, at least one automotive company has used DOE funding to launch itself into success. Tesla received a $465 million loan in 2010 for the design and production of a luxury electric car. Its cars, which plug into supercharging stations, have gained popularity all over the United States. Though it started just a few years ago, the company has already had two profitable quarters. The success allowed Tesla to pay back its DOE loan by May 2012, nine years ahead of schedule.
Keith Patterson is a freelance writer and designer for all things green and sustainable. His work promotes the technological advancements for the benefit of our environment and the constant balance between man, gadget, and world.
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