Electric Car Maker Might File Chapter 11
Posted on February 3rd, 2014
Electric cars could become common sights on Arizona highways in the near future, but one automaker that set out to break the nation’s dependency on fossil fuels might not be around to see it happen. With 75 percent of its workers now unemployed following a mass layoff and a $529 million loan from the U.S. Department of Energy on hold, a business bankruptcy might be the only possible future for Fisker Automotive.
The company’s founder and namesake resigned earlier this year in a dispute with senior managers over the direction the business was taking. Rumors circulated that investors led by a venture capital fund were at odds with the founder over company finances and his inability to attract funding from foreign investors.
Fisker Automotive was predicted to be one of the leading producers of electric cars, but financial issues began to drain the company’s assets. Problems included the bankruptcy of its battery supplier, the freezing of the Department of Energy loan after the company already owed $193 million and overly optimistic sales forecasts for electric cars.
Hope for improvement of the company’s cash flow problems came from the interest shown by at least two Chinese auto manufacturers in purchasing an ownership interest in the troubled automaker. Talks with the Chinese companies broke off with neither company appearing to retain any interest in acquiring Fisker.
Fisker has a payment due this month to the Department of Energy on the $193 million it borrowed. The company’s attorneys might file a commercial bankruptcy on its behalf if the payment cannot be made. The bankruptcy would prevent creditors from seizing the company’s assets. A Chapter 11 business reorganization might give the company the time it needs to negotiate a sale of the business and avoid a liquidation of assets.
Source: NBC News, “Fisker fires 75% of workforce; bankruptcy next?,” Paul A. Eisenstein