Electric vehicle startup Fisker has filed for bankruptcy protections to sell its assets and restructure its debt after it suspended production.
Earlier this year, the company's founder, automotive designer Henrik Fisker, already expressed his doubts about the company's ability to remain in business. The company's failure to secure a crucial investment from Japanese automobile giant Nissan led to a significant $350 million funding shortfall from another unnamed investor. This financial blow forced Fisker to scale back its operations and explore alternative options, like ramping up the production of its Ocean SUVs.
However, the Ocean SUV, dubbed an "asset-light model," initially designed to reduce vehicle development times and lower market entry costs experienced numerous software and hardware issues. Additionally, the car is under regulatory investigation for braking problems, difficulty shifting into park and other modes and doors occasionally failing to open. (Related: EV COLLAPSE: Electric vehicle manufacturer Lordstown Motors files for bankruptcy.)
Moreover, Fisker switched from a direct-to-consumer sales model to a dealership-based distribution approach, signing agreements for 15 dealer locations in the U.S. and 12 partners in Europe. But then, the company delivered less than half its over 10,000 produced vehicles in 2023, while struggling to clear its inventory of more than 5,000 cars.
"Like other companies in the electric vehicle industry, we have faced various market and macroeconomic headwinds that have impacted our ability to operate efficiently," the company stated.
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As a result of all these failures, Fisker Group Inc., the operating unit of Fisker, was forced to file for Chapter 11 bankruptcy protection in Delaware on June 17, with estimated assets of $500 million to $1 billion and liabilities of $100 million to $500 million. This filing marks a second bankruptcy for Henrik Fisker, whose first venture, Fisker Automotive, filed for bankruptcy in 2013. That company fell victim to the 2008 financial crisis and a battery failure in its Karma hybrid sedan, which led to a substantial recall.
"Fisker has been on life support for months now, so today's announcement doesn't come as a surprise. It wasn't the first EV upstart to declare bankruptcy and we don't think it'll be the last," Garrett Nelson, vice president and equity analyst at California Family Rights Act Research said on June 17.
Fisker already warned employees about potential layoffs before filing for bankruptcy
The filing comes after Fisker warned its employees about potential layoffs in April.
According to the announcement, sent through an email by John DiDonato, Fisker's newly appointed restructuring officer, employees might be terminated effective June 28 and the company's facilities could be closed.
"Over the past few months, Fisker's leadership team has been pursuing all avenues to preserve the future of the business and its path forward. Fisker is diligently pursuing all options to address our operating cash requirements, including maintaining discussions with prospective buyers and investors and exploring various restructuring alternatives. There is a possibility, however, that these efforts will not be successful. Should this possibility materialize, the Company has an obligation to provide "conditional notice" that employees — including yourself — will be terminated on June 28, 2024. If the Company must terminate your employment in the future, the job loss will be permanent and the facility will be closed," the email stated.
This communication complied with the Worker Adjustment and Retraining Notification Act, which mandates a 60-day notice period for large-scale layoffs or plant closures for companies with more than 100 employees.
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