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Excellent article from Automotive News International.

http://www.autonews.com/apps/pbcs.dll/article?AID=/20101206/OEM05/312069995



What is Henrik Fisker thinking?

Lindsay Chappell | Automotive News

LOS ANGELES -- Henrik Fisker knows what you're thinking. You're thinking that nobody starts a car company in America and succeeds. Not John DeLorean and his gull-winged sports car. Not Preston Tucker with his clever road-tracking headlights.

The industry is not yearning for new auto brands. It's trying hard to kill the weaker ones it has -- most recently, Mercury, Saturn, Pontiac and Hummer.

But Fisker sees things differently. The Danish sports-car designer, who now lives with his family on a beach south of Los Angeles, is convinced that a rare opportunity exists for a new luxury-car company.

A luxury line, Fisker adds, that is retailed globally and built around a new green technology -- a plug-in electric hybrid powertrain that links on one end to an advanced General Motors Co. gasoline engine and on the other to a wickedly deft battery drive developed for the Pentagon.

"I know what people are saying," says Fisker, blond and youthful at 47, over a plate of venison in a dark Los Angeles restaurant. "Very few people believed that we were going to make it.

"I get the question all the time: Can you really succeed? You can't blame anyone for asking it because, frankly, no one has succeeded.

"But things are different right now," he says, setting down his wine glass and piercing his guest with a serious look. "Today, things have happened that didn't happen for people who tried before. Everything is coming together for us and in ways that we didn't even think possible five years ago."

To his point, the strokes of luck that his Fisker Automotive has been enjoying since launching just three years ago would make for an improbable movie plot.

For starters, who could have anticipated that just as Fisker was wishing he could find an East Coast manufacturing plant to build his cars, GM would plunge into bankruptcy and offer him its Wilmington, Del., plant for a mere $20 million?

Or even more implausible, who could have guessed that just as Fisker and his partners were tallying up the enormous capital outlays needed to develop and manufacture a family of new $90,000 and $50,000 luxury cars, the U.S. Department of Energy would award them low-interest loans totaling $528 million?

Those funds, plus a few hundred million more in private funding -- $115 million came in last month -- are enough to get Fisker Automotive started, CEO Fisker says.

"Not many car companies have started up with a billion dollars in cash," he says, taking a sip of wine.

He declines to say how much of the war chest he has spent to date. He acknowledges that a public stock offering could be in Fisker Automotive's future but declines for legal purposes to elaborate.

But launching a car company is hardly as simple as raising money and designing luxury cars. Or hardly as cheap. Twenty years ago, at 20-year-ago prices, GM spent $4.5 billion to launch its Saturn brand -- which ultimately failed. Nissan Motor Co. is spending almost $2 billion just to put its existing U.S. retail network into the electric-car business, excluding the cost of developing the vehicle.

Fisker closes his eyes and nods yes. He knows all that.

"But the time is right."

A chance meeting

The idea of becoming a global automaker didn't spring to life in full-blown detail. Rather, it has been one of those "one thing leads to another" tales -- but in hyperspeed.

Five years ago, the dashing designer, who is rarely spotted wearing a necktie, found himself in his early 40s, having already attained luxury styling world celebrity. Fisker had been CEO of BMW's global design house in California, DesignworksUSA -- where he produced the BMW Z07 retro-roadster concept and then the production-version Z8, which went on to star in the James Bond movie The World is Not Enough.

Ford Motor Co. hired Fisker away to London to become design chief and a board member of its Aston Martin brand. There, he drew the Aston Martin DB9 and V8 Vantage, then ran Ford's Ingeni "creativity center." In 2003 Fisker found himself back in California as director of Ford's Global Advanced Design Studio in Irvine.

Fisker's longtime friend and engineering colleague, Bernhard Koehler, worked at some of those placements. Koehler, a Munich native, went to work for BMW 30 years ago at age 16 as an apprentice in body sculpting. He helped develop the Mini prototype before leaving BMW as a senior design and engineering executive.

In 2005, Koehler and Fisker wound up together again at Ford's Irvine design center, where they discovered they shared the same entrepreneurial itch.

They gave up the corporate life to start their own company across town, Fisker Coachbuild. Their plan was to create and carry out design variations of existing high-end cars such as the Mercedes-Benz SL55 coupe. At the same time, Silicon Valley venture capitalist Elon Musk retained the duo to help design an electric car for his own startup automaker, Tesla Motors Inc. That deal would have legal ramifications in the months to follow.

But Fisker and Koehler had barely printed business cards when a chance meeting took them in yet another direction.

While shopping at a local Land Rover dealership near Los Angeles, Fisker's wife met a woman who said her husband was also in the auto business. The two women arranged a dinner date to get their husbands together. The other man turned out to be Alan Niedzwiecki, CEO of a hybrid-drive technology company called Quantum Fuel Systems Technologies Worldwide Inc., also in Irvine.

Quantum had big plans of its own. The company, founded in 2000, had developed a stealth propulsion system to power U.S. military combat vehicles. Quantum was also gearing up to market a hybrid-electric powertrain system called Q-Drive to automakers.

During their dinner in 2007, a serendipitous opportunity became obvious: Niedzwiecki was an advanced technology supplier looking for a consumer vehicle. Fisker was a vehicle maker with no powertrain resources.

Recalls Fisker: "We sort of reached the same idea at the same time. We said, 'We should start a company together.' "

The resulting venture would be Fisker Automotive Inc., a corporation set up to produce and market its own cars. Quantum would help fund the venture and exclusively supply the cars with its Q-Drive powertrains. Fisker Coachbuild would design and engineer the cars. Henrik Fisker himself would style the cars.

And somewhere, they assumed, they would find an automaker to assemble their cars on a contract basis.

Fisker and Koehler spent the next year meeting with other U.S. manufacturers about contracting to produce their future car. In 2007, with the U.S. auto industry showing signs of a recession, they thought it would be easy to find someone interested in producing a low-volume, high-end model.

They met with GM, Toyota, Chrysler, Ford and Magna International. Magna's big Austrian coachbuilding subsidiary, Magna Steyr, for years had expressed an interest in opening a U.S. plant.

In the end, Fisker turned to Valmet Automotive Inc., a coachbuilding company in Finland that had been producing the Porsche Boxster and Cayman and other vehicles.

A misstep in Detroit

In January 2008, Fisker went public with the plans. The company unveiled the prototype of its first vehicle -- the Karma -- to audiences at the Detroit auto show. It was a four-door model boasting a 400-hp battery drive with such otherworldly touches as an instrument panel laced with weathered driftwood from Lake Michigan. Fisker told reporters that the Karma would sell for about $80,000 and would start production near the end of 2009.

Although accurate at the time, both projections would prove to be wrong. The Karma is now pinned to a March 2011 launch at the Valmet plant in Finland, and the likely retail price will be slightly above $90,000. Fisker looks at his Detroit debut as his biggest mistake to date.

"It was premature," he admits. "But it couldn't be helped. We had to show the world what we were planning."

He has moved to set the record straight: Last month, the company displayed a Valmet-produced Karma at the Los Angeles Auto Show, signaling that the car is nearing a market launch, challenges aside.

Outsiders continue to wonder about Fisker's intentions.

"I don't know if I'm on board with the Fisker concept," admits Jeff Jowett, an analyst with the industry forecasting firm IHS Automotive. "I suppose there are enough people who can afford a green luxury-brand car, especially in Southern California."

But Jowett says that what is primarily driving the industry's push toward electric powertrains and hybrids is tighter emissions regulations that take effect in 2015.

Says Jowett: "I could more easily see Fisker becoming a vehicle line that a larger automaker acquires to help them meet the new regulations."

Crash cools investors

Fisker plans to build 15,000 Karmas a year in Finland. But the company aims to produce up to 10 times that many cars in a former GM plant in Delaware as more models join the Karma over the next six years.

Henrik Fisker's scheduling setback after the 2008 Detroit show was not technical or conceptual; it was purely financial. The market crash that occurred that year thinned out the private investors he had been courting. Vehicle development was delayed a year.

New funds did materialize. A key backer has been the venture capital firm Kleiner Perkins Caufield & Byers, whose managing partner, Ray Lane, is Fisker Automotive's chairman. The nation of Qatar's investment arm put $65 million into Fisker Automotive.

Parts suppliers provided an additional challenge. Some expressed their own skepticism about the startup and asked the company to pay them in advance for their participation.

At the same time, he faced an unexpected legal challenge. Four months after the 2008 Detroit show, rival Elon Musk responded to news of Fisker's automaking plans with a lawsuit alleging that Fisker and Koehler had obtained Tesla's vehicle plans.

Arbitration concluded that there was no substantiation of fraud nor grounds for damages and ordered Tesla to pay Fisker more than $1.1 million in legal fees.

Paradoxically, it was during the industry meltdown in 2008 and 2009 that things began to work out better than imagined for Fisker.

Big bucks from the feds

The Energy Department awarded Fisker Automotive two loans to support its product development: $169 million to fund the high-end Karma and $359 million to fund Project Nina. But the Energy Department funds can be spent only inside the United States. That meant that the Valmet manufacturing project must be financed by private investment, although the federal money can fund U.S. r&d related to the Karma.

The award also meant that Fisker Automotive needed to step up its U.S. factory plans. Initially, the company had targeted 2013 to introduce a U.S.-built Nina -- a name Henrik Fisker intends to change closer to market launch. Under the Energy Department agreement, the company was required to speed up the introduction by a year.

GM and Fisker Automotive were motivated to close on a deal for the Wilmington assembly plant. Wilmington had built the Saturn Sky and Pontiac Solstice roadsters.

Henrik Fisker says the 2009 deal had been in the works for months when the Energy Department made its award. But the timing of the fire-sale transfer -- $20 million for a modern auto plant that would cost 20 times as much to build from scratch -- became a source of bad publicity.

Were feds meddling?

It raised suspicions that the new Obama administration was meddling in private industry. News reports at the time suggested that Fisker Automotive had been pushed into buying Wilmington by the Obama White House -- specifically by Delaware native and Vice President Joe Biden as a job-saving quid pro quo to get the Energy Department award.

"That just wasn't true," Henrik Fisker says. "We had been talking to GM about Wilmington for a year. There was no pressure. None.

"The truth was that we were looking for a plant. We needed a plant. We have some big plans."

Wilmington provides Fisker Automotive with production capacity for 250,000 vehicles a year. Although Valmet will build only 15,000 Karmas a year, Fisker's CEO envisions using Wilmington to produce up to 10 times that many vehicles annually as higher-volume models come on line over the next six years.

The Karma will be moved to Wilmington for its second generation. Valmet Automotive will be Fisker Automotive's consultant in the Wilmington retooling and launch.

Koehler, who is Fisker's COO, is shuttling the Atlantic between Finland and Wilmington almost weekly overseeing production startups on two continents, as well as operating out of Irvine and working with a supplier team in China, where some Asian parts are being sourced.

GM is itself a critical supplier. Fisker Automotive's Q-Drive will rely on a new GM 2.0-liter direct-injection engine to run the electric motors that drive the wheels of the car when its lithium ion battery, supplied by A123 Systems Inc., runs out of power.

GM has not released details about the arrangement. But in September, the automaker said it will spend $483 million to build the 2.0-liter engine at its plant in Spring Hill, Tenn.

As the spring 2011 launch draws near, Fisker Automotive's board has added other industry heavyweights. On Sept. 21, the board named as directors Barry Huff, a former consultant adviser to GM and U.S. suppliers, and Hans-Joachim Schopf, a former Mercedes-Benz executive.

In October, silent investor Qatar obtained a director's appointment for its portfolio executive director, Kamel Maamria.

Maamria's fellow director Vic Doolan -- a former executive at several automakers -- responds somberly to that question that hovers over the Fisker venture: What makes you believe Fisker can launch a car company?

Ever elegant in a dark, English-cut, pinstriped suit and pocket square, the well-known Doolan, 70, concedes that it has been tough -- at least for some startups.

"But not for everyone," he points out. "A little company called BMW managed to try it and succeed, I believe. And so did a company called Porsche.

"So you see it can be done. You just have to do it right."

The Fisker portfolio

Fisker Automotive plans 6 models between 2011 and 2016. CEO Henrik Fisker says designs are complete for 5.

• Karma sedan: A luxury 4-door plug-in hybrid.
• Karma convertible: A prototype, called the Sunset, was shown in 2009.
• Second Karma-based derivative
• Nina: The smaller sedan will be built in Delaware starting in 2012.
• Nina coupe, crossover: Fisker executives have not confirmed, but in announcing the company's acquisition of GM's Wilmington, Del., plant, Vice President Joe Biden let slip the plan for a coupe, crossover.

You can reach Lindsay Chappell at [email protected]
 
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