Unless its celebrity customers such as teen idol Justin Bieber and actor Leonardo DiCaprio want to put a lot of their own cash into the business, it looks like hybrid sports car company Fisker Automotive is nearing the end of the road.
Fisker has hired Kirkland & Ellis, a major bankruptcy law firm, to review the company’s options while it continues to seek investment partners.
“We are not commenting at this stage in the game,” said Roger Ormisher, a Fisker spokesman. “There are too many moving factors and a number of different directions this can go.”
The automaker has been working for months to raise $500 million so it could restart production of the Karma, its only model, which is built in Finland. Fisker stopped making the $110,000 plug-in hybrid last year after A123 Systems Inc., the maker of its lithium-ion battery, filed for bankruptcy.
The company ran into a cash crunch after the federal government froze an Energy Department loan to the company. A bankruptcy liquidation or restructuring could leave the government about $192 million in the hole. That’s what Fisker borrowed under the credit line before funding was shut off.
“It is a really hard market to break into,” said Kristin Dziczek, of the Center for Automotive Research in Ann Arbor, Mich. “We have seen a lot of start-up auto companies struggle and disappear.”
Launching a car company takes more than a good design. The business has to be able to produce the vehicle efficiently and develop a sales, marketing and service network, all endeavors that eat up enormous amounts of cash, Dziczek said.
“They are also in a higher price point with a vehicle that is not going to appeal to everyone,” she said.
Fisker also has run into stiff competition for six-figure, highly styled, advanced powertrain autos from electric carmaker Tesla Motors, which has its own factory and partnerships with major companies, including Toyota, Daimler-Benz and Panasonic.
To conserve cash, Fisker put its U.S. staff -- 200 employees -- on furlough this week.
Potential investors appear to be pulling out.
Xu Ping, chairman of Dongfeng Motor Group Co., told reporters in Hong Kong earlier this week that his company couldn’t reach a deal with Fisker.
Other companies previously reported to be in talks with Fisker, including Geely Holding Group, the Chinese company that owns Volvo, and Wanxiang Group Corp., a Chinese company that recently bought A123 Systems out of bankruptcy, don’t appear to be advancing.
Another sign of trouble was the abrupt resignation of company founder Henrik Fisker, the automaker’s executive chairman, earlier this week in what he described as a management dispute.