Fisker Automotive, the struggling, government-backed hybrid sports car maker, said on Friday that it terminated most of its rank-and-file employees, in what sources said was a last-ditch effort to conserve cash and stave off a potential bankruptcy filing.
Fisker, which raised $1.2 billion from investors and tapped nearly $200 million in government loans, has "at least" $30 million in cash, according to a source familiar with the company's finances. This does not include $15 million Fisker will receive after settling a claim this week with its bankrupt battery maker, the source said.
About 160 employees were fired at a Friday morning meeting at Fisker's Anaheim, California, headquarters, according to a source who attended the meeting. They were told that the company could not afford to give them severance payments.
Fisker confirmed in a statement that it let go about 75 percent of its workforce but did not specify the number of workers affected. It called the move "a necessary strategic step in our efforts to maximize the value of Fisker's core assets."
"Unfortunately we have reached a point where a significant reduction in our workforce has become necessary," the company said, adding that it was still searching for a strategic partner.
The layoffs are the latest symptom of Fisker's cash crunch. In late March, Fisker put its entire U.S. workforce on furlough. It also hired law firm Kirkland & Ellis to advise on a possible bankruptcy filing.
The layoffs hit several key departments, including engineering, public relations and marketing, according to the source who attended Friday's meeting in Anaheim.
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.
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 a bankruptcy restructuring.
APRIL 22 PAYMENT LOOMS
Fisker, which was founded in 2007, hopes to renegotiate a DOE loan payment due on April 22, which the source familiar with Fisker's finances said was around $10 million.
In 2009, the DOE awarded Fisker a $529 million loan as part of a U.S. program to finance advanced vehicle development. Fisker pledged its assets, including equipment and property, as collateral on the DOE loan, according to the loan agreement dated September 18, 2009.
The company's flagship vehicle, the $100,000-plus Karma plug-in hybrid, 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.
Fisker used $193 million of the DOE loan and earmarked the rest for a second plug-in hybrid, the Atlantic, but the DOE froze the credit line after delays in launching the Karma. The last payment from the DOE came in May 2011, government records show.
"The Department of Energy stopped payment on the federal loan in 2011 after Fisker stopped meeting their milestones, and is committed to the best outcome for taxpayers," DOE spokeswoman Aoife McCarthy said in a statement.
"Despite Fisker's difficulties, our overall loan portfolio of more than 30 projects continues to perform very well, and more than 90 percent of the $10 billion loan loss reserve that Congress set aside for these programs remains intact," she said.
The Energy Department's loan program has been under scrutiny ever since solar panel maker Solyndra went bankrupt in mid-2011. Since then, other U.S.-backed companies have failed, notably Fisker's battery supplier formerly known as A123 Systems and now called B456 Systems Inc.
STALLED NEGOTIATIONS IN CHINA
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.
The company has not produced a car since July and has been seeking a financial backer to help finish the development of the Atlantic and produce it at a Delaware plant.
Fisker had been in talks with Chinese automakers Dongfeng Motor Group Co Ltd and Zhejiang Geely Holding Group to gauge interest in acquiring a majority stake.
But those efforts stalled after both companies 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 now is open to selling off pieces of the company, including intellectual property rights for its plug-in electric hybrid technology, sources have previously said.
(Additional reporting by Paul Lienert in Detroit; editing by Jeffrey Benkoe and Matthew Lewis)