Fisker Automotive, the struggling, government-backed hybrid sports car maker, terminated most of its rank-and-file employees on Friday, in a last-ditch effort to conserve cash and stave off a potential bankruptcy filing, sources said.
In a statement, Fisker confirmed that it let go about 75 percent of its workforce. The automaker said it was “a necessary strategic step in our efforts to maximize the value of Fisker’s core assets.”
A Fisker representative could not immediately answer questions on the company’s financial position. In the past, the automaker has declined to comment on the possibility of bankruptcy.
Fisker, which raised $1.2 billion from investors and tapped nearly $200 million in government loans, has “at least” $30 million in cash, plus $15 million due after settling a claim this week with bankrupt battery maker A123 Systems Inc (AONEQ.PK), according to a source familiar with the company’s finances.
About 160 employees were terminated at a Friday morning meeting at Fisker’s Anaheim, California, headquarters, according to a second source who attended the meeting. They were told that the company could not afford to give them severance payments.
Fisker asked 53 senior managers and executives to stay on board, primarily to pursue buyers for the company’s assets, the source said. The remaining Fisker executives also are continuing negotiations with the U.S. Department of Energy.
The company hopes to renegotiate a DOE loan payment of about $10 million that is due on April 22, the source familiar with Fisker’s finances said.
Fisker last week hired law firm Kirkland & Ellis to advise on a possible bankruptcy filing, while executives continue their search for a strategic investor.
The company, which makes the $100,000-plus Karma plug-in hybrid, has not produced a car since July and is seeking a financial backer to help finish the development of a second plug-in hybrid, the Atlantic, and produce it at a Delaware plant.
Fisker has faced many challenges over the past month, including the abrupt resignation in March of its founder, Henrik Fisker, over “several major disagreements” with top management.
Its efforts to find an investor in China also stalled. The company had been in talks with Chinese automakers Dongfeng Motor Group Co Ltd (0489.HK) and Zhejiang Geely Holding Group GEELY.UL to gauge interest in acquiring a majority stake.
Both Geely and Dongfeng balked at the terms of Fisker’s loan agreement with the DOE. Fisker’s chief executive, Tony Posawatz, visited China to try to rekindle those deals, sources said.
Fisker, founded in 2007, has the backing of Ray Lane, a managing partner at venture firm Kleiner Perkins Caufield & Byers who is also a Fisker director.
In 2009, the DOE awarded Fisker a $529 million loan as part of an Obama administration program to finance advanced vehicle development. Fisker used $193 million of the loan and earmarked the bulk of the funding for the Atlantic.
The Karma quickly won accolades for its styling and cachet with celebrities, including pop star Justin Bieber and actor Leonardo DiCaprio, who is also an investor in the company.
But the DOE froze its credit line partly due to Fisker’s delays in launching the Karma. The last payment from the DOE came in May 2011, government records show.
The resulting cash crunch made it tough for Fisker to meet what Posawatz described last year as an “overly ambitious and aggressive” business plan.
Fisker has been flagging its interest in a strategic partner since at least April 2012, when then-CEO Tom LaSorda unveiled a concept version of the Atlantic at the New York auto show. LaSorda later left the company and was succeeded by Posawatz.
Sources said this week that Fisker now is open to selling off pieces of the company, including intellectual property rights for its plug-in electric hybrid technology.
(By Deepa Seetharaman. Additional reporting by Paul Lienert in Detroit; editing by Jeffrey Benkoe and Matthew Lewis)
Photo: The Fisker automotive electric Atlantic sedan logo is seen during its unveiling ahead of the 2012 International Auto Show in New York April 3, 2012. Credit: Reuters/Allison Joyce