Fisker Automotive may be seeking salvation from China

Since last weekend a handful of news outlets have reported that Fisker Automotive is seeking funding and strategic partnerships in China. The company has run into some trouble, where first they were unable to begin production of the Fisker Atlantic when the US Dept of Energy froze the loans that was to have funded the Atlantic, and second had to stop manufacturing of the Fisker Karma due to the bankruptcy of A123 Systems. Despite having raised a prodigious amount of capital during 2012, a lack of sales due to a manufacturing halt would blow a hole in the middle of their financial status.

According to a Global Times report over the weekend, Fisker Automotive is "scouring Asia" for "funding and strategic partnerships." Supposedly a major driver is China's support for green technology and "support of local Chinese automakers' efforts to acquire "green car" technology from abroad." Named companies are China Grand Automotive Services Co, a large dealership group that is already distributing the Fisker Karma in China, and The Wanxiang Group, the large autoparts maker that won control of A123 Systems in the bankruptcy of that company. Fisker is reportedly scheduled to have talks with other, unnamed, companies.

A Reuters report quoted Fisker spokesman Roger Ormisher as saying "Fisker is in advanced talks with a number of potential strategic partners," he said via email. "We expect some exciting developments in the next few months." He declined to say which companies Fisker's management has spoken to.

The US Dept of Energy froze Fisker's loan program, part of which was to help fund development of the Fisker Karma, and the bulk for development and manufacturing of the Fisker Atlantic. That forced Fisker into freezing work and laying off workers at the former GM plant in Delaware that was to manufacture the Atlantic. The Dept of Energy did not do this capriciously, but took that action after Fisker missed several business development milestones and was late to the market with the Karma. In May the company issued a "business update" that said the company had delivered over 1,000 Karma's since December 2011. Since then the company has claimed to have made over 2,000 deliveries to customers. Fisker's dealer network has continued growing including expansion overseas in Europe and the Middle East.

As for A123 Systems, that company began having problems just before Christmas 2011 that forced a recall of Fisker Karma's. Other problems ensued leading eventually to the bankruptcy of A123 Systems. One result of the bankruptcy was Fisker had to halt Karma production because A123 Systems was not building battery packs. In December, the bankruptcy auction resulted in Wanxiang America gaining control over A123 Systems, subject to US government approval. The Strategic Materials Council has come out in opposition to the sale of A123 Systems to China.

Fisker's main task is to restart production of the Karma, and launch production of the Atlantic. Battery packs of the sort A123 Systems supplied are not interchangeable with those from other battery pack suppliers, because the lithium-ion battery market doesn't have the required level of maturity. Instead, electric cars are designed around the battery pack, and for Fisker to switch battery suppliers would require a complete redesign of the Karma and Atlantic. This is, then, is not just about raising capital but getting A123's factories cranked back into production, presumably with a Wanxiang logo on the building.

Fisker had been raising capital all through the year, but their last filing with the SEC was on Sept 26, 2012, disclosing that round of funding was to total $150 million and the company had raised $104 million. The previous round of fundraising inflated to $500 million, of which the company raised $410 million, as of a report in April 2012. Because Fisker Automotive is not public we have limited visibility to their actual financial status.

In September 2012 a report by China Daily claimed Fisker Automotive had set November 2012 as their launch date for Karma sales in China. The company did not reach this milestone. At the LA Auto Show in November, Fisker's management said the launch date would slip to the first quarter of 2013, due to a "slight delay in obtaining final certification to sell cars in China". A problem Fisker will face in selling the Karma in China is that, because it is not manufactured in that country, they will face stiff import duties, so stiff that many other auto manufacturers have instead set up manufacturing plants in China.

Sources: Global Times, Reuters, China Daily