The luxury hybrid maker Fisker Automotive is in dire financial straits after receiving $192 million in government-backed loans and receiving market assistance from tax credits, and if the company goes bankrupt it could become the largest loss to taxpayers since the failure of Solyndra in 2011.
According to the Institute for Energy Research, taxpayers stand to lose $171 million if Fisker goes under. This would be in addition to the tax credits received by those who purchased the $103,000 Fisker Karma, a luxury hybrid vehicle.
Fisker was given a $529 million loan guarantee by the Obama administration with the goal of producing 11,000 Karmas by 2011 and 75,000 of the company’s second planned model, the Nina, by 2012. Last week, the Obama administration seized $21 million from Fisker as part of its repayment of the $192 million in loans the company drew on — meaning that $171 million still needs to be recovered.
However, the research firm PivCo revealed that the company violated its loan agreements multiple times before being cut off by the government for not meeting the benchmarks required to keep getting tax dollars. The Obama administration allowed the company to continue to draw down on their $529 million loan after these violations, but ultimately cut them off in 2011.
Bloomberg reported that technical defaults began in 2011 partly due to “lower-than-required earnings before interest, taxes, depreciation and amortization, and failing to meet a production milestone of at least 11,000 vehicles sold to dealers for an average of $87,500 by Sept. 30, 2011.”
The PivCo report also found that Fisker was losing $557,000 on each car it sold. Fisker spent $660,000 in taxpayer dollars and venture capital funds on each car it sold, but the Karma only sold for $103,000.
“Fisker’s troubles are a sad reminder of the Department of Energy’s loan failures. The jobs we were promised never materialized,” said Michigan Republican Rep. Fred Upton and Pennsylvania Rep. Tim Murphy. “This deal has been plagued with problems and the question remains: should Fisker have received the half billion dollar loan in the first place?”
Fisker has only sold 2,000 Karmas worldwide, and only 900 of those sales occurred in the United States, where buyers could take advantage of a generous $7,500 tax credit per vehicle. The company has not built a car since July 2012.
Recently, Fisker hired a law firm and a crisis management PR firm to handle a possible bankruptcy filing, and also laid off 160 employees without severance benefits.
However, the company still has its defenders. Fisker founder and former CEO Henrik Fisker told a congressional committee that he did “not believe that any taxpayer dollars have been lost” on the company.
“Four years ago, the American automobile industry was on the brink of collapse during a historic economic crisis,” said Nicholas Whitcombe, former director of the loan program Fisker got support from. “Now, in part because of help from the [Advanced Technology Vehicles Manufacturing] program, America’s automotive industry is reinventing itself — expanding production, growing profits, creating jobs, and making more fuel efficient automobiles.”
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