Bankruptcy looms for electric vehicle maker running out of options

Fisker struggles to stay in business as the EV maker faces some harsh realities.

Mar 28, 2024 - 06:30

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Bankruptcy looms for electric vehicle maker running out of options

The title of the YouTube video doesn't mince words: "This is the Worst Car I've Ever Reviewed."

Technology reviewer Marques Brownlee made the video, and the car he was skewering was Fisker's (FSR) Ocean electric SUV.

Brownlee says at the outset of the video that he really wanted to like the Ocean, but tells viewers that most of "the software in the car is, to be totally honest, a mess."

"I don't think I've started this car one time and not gotten some error on the screen behind me," he says from the driver's seat.

He tells viewers he's actually rooting for the vehicle's success because "competition is good and the fundamentals are solid." However...

"I've only had the car for a couple of days, but my point here is you could give me this car and I wouldn't want to drive it," Brownlee says.

"There are so many annoyances, especially with things just like the cameras, and the driver assistance things beeping and blinking randomly for no reason," he added. "It just feels like the buggiest car I've ever tried."

Brownlee's video, which has racked up 4.8 million views, was probably the last thing the battered EV maker needed to hear as it struggles to stay afloat.

Fisker fights to survive.
picture alliance/Getty Images

Bad news mounts for the EV company

A Consumer Reports write-up was equally uncharitable, as the publication described the Ocean's ride comfort as "both nauseating and jarring" with one tester calling it "the worst of both worlds."

The reviews were the latest in a series of blows to the Manhattan Beach, Calif.-based company co-founded by Henrik Fisker, a Danish automotive designer, and entrepreneur.

On Monday, shares of the company that said it was "revolutionizing the automotive industry" were halted.

The New York Stock Exchange announced later that day that it planned to delist Fisker’s stock due to “abnormally low” price levels.

Fisker said in a filing with the Securities and Exchange Commission that delisting means the company must offer to buy back bonds currently due in 2026 and pay off other debts due in 2025 immediately.

"We do not currently have sufficient cash reserves or financing sources sufficient to satisfy all amounts due under the 2026 Notes or the 2025 Notes, and as a result, such events could have a material adverse effect on our business, results of operations, and financial condition," Fisker said in the SEC filing.

Shifting into survival mode, Fisker began slashing prices on March 26, including on the most expensive Ocean, which was marked down by nearly 40% to $37,499.

The company told Bloomberg that discounts on the Ocean are designed to make the electric SUV “a more affordable and compelling EV choice.”

A few days earlier, Fisker announced on its website that the Ocean had won the iF Design Award 2024 for “Best Electric Vehicle: SUV."

The company said that "the Fisker Ocean is ready to disrupt the automotive world with its beautiful craftsmanship, ingenious engineering, innovation, affordability, and world-class durability."

A crucial deal collapses

Fisker, which launched in 2016 after its founder’s former startup, Fisker Automotive folded a few years earlier, said it had been in talks with "a large automaker," which Reuters had identified as Nissan.

However, the company said the automaker had terminated negotiations and Fisker was continuing "to evaluate strategic alternatives," including in or out-of-court restructurings, capital markets transactions, and the potential sale of assets and businesses.

In January, Fisker announced that it would shift from direct sales to a dealer partnership model. A month later, the company laid off 15% of its staff, roughly 200 people, and paused production

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During the company’s earnings call early this month, Chief Financial Officer Geeta Gupta-Fisker told analysts that “there is substantial doubt about our ability to continue the going concern when we file our 10-K with the SEC.”

"As we roll out our dealer partnership strategy, we expect our sales to grow as consumers become more aware of our brand and have the ability to test drive and kick the tires," she said.

Henrik Fisker told analysts that the company produced 10,193 Oceans and delivered over 4,900 across 12 countries.

"We are proud of what we were able to achieve, but acknowledge that these totals were below the guidance we provided during the year despite what we believe was the swiftest and largest delivery expansion of any EV startup company ever," he said.

Surely, Fisker isn't the only struggling EV maker.

The sector has been going through some difficulties and market conditions have been particularly hard on startups, such as Lordstown Motors, which filed for Chapter 11 bankruptcy in July 2023 to restructure and sell its assets.

There's a very slim chance that a white knight investor may emerge to pull Fisker from the brink of oblivion. But right now it's not looking good. A Chapter 11 filing could be looming for it, too.

"I think the theme here is it's just a young company that doesn't really know exactly what they're doing with a lot of these choices," Brownlee said on the YouTube video.

And let us not forget those immortal words of Henrik Fisker himself.

"You know what?" he once said. "Starting a car company is risky."

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