Published on April 19th, 2013 | by Christopher DeMorro
How Fisker Burned Through $1.3 Billion
With Fisker Automotive on the brink of bankruptcy, there are those of us left wondering how this small niche automaker managed to spend $1.3 billion of public and private investments in just a few short years. A new report lays out in detail how Fisker Automotive blew through a billion dollars, while developing and delivering just over 2,000 vehicles, becoming possibly the biggest venture capital blunder in history.
The report by PrivCo details the beginning, middle, and end of Fisker Automotive and how the company managed to convince both the U.S. government and private investors that the company could produce tens of thousands of Karma hybrids per year. But high development costs, over-expansion, and the failure to bring the Delaware factory online all sucked money from Fisker’s coffers.
Essentially, Fisker overpromised and underdelivered, with the terms of the Department of Energy Green Loans program calling for 11,000 Fiskers on the road by mid-2011. In reality, Fisker delivered just 2,200 cars in that time, resulting in the DOE loan being cut off. Without that money, Fisker could no longer develop its next vehicle, the lower-cost Fisker Atlantic.
Even though the government pulled the plug on its loan, PrivCo still found that the loan underwriting terms were grossly negligent. There was no way Fisker could deliver on its promise, and never should have gotten a dime. In the end the Fisker debacle cost U.S. taxpayers over $192 million (not including what Delaware pitched in). Worse though, the government failed to warn other investors, and the private capital kept coming in. When all was said and done, Fisker spent close to $600,000 per car, and then sold them for just $70,000 to dealers. No wonder they went belly-up.
That was pretty much the beginning of the end, not just for Fisker but for battery maker A123 Systems as well. A123 had agreed to sell battery packs to Fisker at a cost of $14,500 per pack for the first 15,000 packs. Without that income though, A123 itself went belly-up, being purchased on the cheap by a Chinese auto parts maker.
The Fisker Karma itself holds some of the blame though. A scathing report from Consumer Reports, a major battery recall, fires, and a high-price that targeted just 1% of potential buyers meant that this project was pretty much doomed from the start. Yet few people seemed to realize the failure of Fisker until it was too late. In the end, there are 600 unsold Fisker Karmas on lots, and the company that raised $1.3 billion has less than $20 million left.
The whole report is scathing, and definitely worth a gander. At this point if Fisker is to survive, it will most likely be bought up by another Chinese company for its hybrid technology before being transferred to the scrap heap. And maybe that is for the best.