A few days old, so apologies if this is posted elsewhere:
I highlighted in red the errors in Lutz story - last I checked, Hurricane "Katrina" did not destroy "800" Karmas. Talk about quality reporting/writing.Bad Karma: Should Fisker Get More Federal Aid?
Not since the General Motors bailout or the Chevy Volt has there been so much interest in the federal government’s role in the auto industry. It’s clear that Fisker, after an auspicious debut in 2008, has burned through well over half a billion dollars in private capital and Energy Department loans. Remaining DOE funds are blocked over Fisker’s failure to meet loan covenants, and the company, which hasn’t produced a new car since the middle of last year, has laid off 75% of its workers and is totally out of cash. Should the federal purse strings be relaxed to give Fisker breathing space?
Let’s look at a few facts: the big Karma, designed by Henrik Fisker, is quite possibly the most beautiful four-door sedan ever. The technology, similar to that of the Chevrolet Volt, was ground-breaking and soon to be adopted by many of the leading manufacturers as they seek to meet stringent CO2 and fuel economy rules. Introduced at the height of the “green car” craze, fueled by “reliable” predictions of “peak oil” and a rise in gasoline prices to $5 a gallon or over, the moneyed eco-class signed up in droves. Development was fast, but, for the most part, excellent.
Then, the bad luck struck: false reports of battery fires, real battery problems due to a production error at supplier A123, and subsequent Chapter 11 of same, all weighed heavily on sales. Katrina sank some 800 cars in New Jersey which were only partly insured. And, thanks to Texas shale and the Backen, oil is cheap and plentiful and, inflation-adjusted, cheaper than it has been for a long time. The green craze is, frankly, ebbing, and interest in conventional cars remains strong. (Governments are now the chief pushers of the CO2/green agenda. That makes it relevant still.)
The nagging question: should Fisker be bailed out? After all, the feds bailed out GM! What’s the difference? Ah, there is one! GM was a product powerhouse, preparing the best line of cars and trucks in the last 50 years. Its manufacturing and supply base were of a high level. GM was not sunk by losing money on vehicles: it sank due to overwhelming legacy costs that simply swamped them.
Fisker has no immediately-ready new product. It has no “legacy costs.” The problem with Fisker is one of fixed costs (headquarters, engineering, design, manufacturing facilities, staff) which were all geared to a revenue commensurate with the annual sale of 20,000 or more cars annually, not a volume of roughly 2,500 currently in the hands of customers. Bottom line; without a radical re-sizing of the company, closing of the California headquarters and an employee base just big enough to support the Karma (we’ll worry about the smaller Atlantic when they have some money), I don’t see any change in their future. The big Wilmington Assembly plant, sized for 300,000 cars per year, and which sank the Pontiac Solstice due to its high cost of operation, has to go. So does production of the Karma in Finland, which eats up about $10,000 per unit in transportation costs alone.
I want Fisker to live and succeed, if only to ensure a continuing supply of Karma bodies for my and my parter’s VL Destino, a de-electrified Karma with a Corvette drive train, for which there is brisk demand while new electric Karmas languish on the lots of disheartened Fisker dealers around the globe. Save them with more federal largesse? A tough call. Glad I don’t have to make it!