The U.S. government is currently attempting to auction off a $168 million loan outstanding to the Department of Energy from failed electric car manufacturer Fisker. The loan will be auctioned on 7 October with bids welcomed ahead of the event, which is certain to catch the attention of an array of potential investors. So what exactly has happened to Fisker and what is the US government doing auctioning off the remaining $168 million loan?
Initially the U.S. government granted a $529 million loan (although only part of this was ever paid out) to Fisker to aid the company's development of electric powered vehicles. There were high hopes for the company which seemed to be at the cutting edge of the industry, although very quickly timetables started to slip, finances start to tighten, and slowly but surely the company fell into financial trouble. While the company has yet to be officially declared bankrupt, with a number of bidders seemingly circling, there is little or no hope of a return under its current guise and outside investors will be needed.
What does the U.S. government hope to achieve?
When we inform you that the U.S. government recently auctioned off a $50 million outstanding loan to Vehicle Production Group (a company which made wheelchair accessible vans powered by natural gas) and received just $3 million, it does not take a genius to appreciate that the likely return on the $168 million Fisker loan will be minimal.
Quote from ElectricForum.com : "The $193 million loan from the US government to Fisker Automotive is being called into question with the company now experiencing severe financial difficulties. It now begs the question as to whether it was a sensible move to give such a large loan to the company and indeed whether any of the other loans to electric car companies need to be reviewed?"
The U.S. government is looking to ensure that any investor that takes on the outstanding loan, and effectively takes control of the company, will need to ensure that the business remains in the U.S. and the technology and manufacturing capacity is not transferred overseas. This could potentially be seen as a shot across the bows of the Chinese government and Chinese EV companies which have been very prominent in the industry of late.
Does Fisker represent problems for the EV industry?
While in some ways you can compare the aspirations of Fisker to those of Tesla, it is perhaps the way in which the company was run which has caused the real problems. There were cost overruns, there were manufacturing overruns, and perhaps the final straw was the bankruptcy of the company's battery supplier. On the surface it does look as though Fisker is potentially dead and buried, but is this really the case?
At this moment in time it is common knowledge that a number of potential bidders have stepped forward and with the U.S. government unlikely to demand a significant repayment in exchange for transferring the outstanding loan, this should not be a major issue going forward. So far no decision has been made on the future ownership of the company although due diligence and business plans will no doubt be announced in the short to medium term.
While the U.S. government would hope to receive a significant payback on the outstanding $168 million loan to Fisker, the reality is that it will receive nowhere near this figure. Indeed, if recent similar events were to be replicated then the US authorities would likely receive somewhere in the region of $10 million. However, perhaps the major issue going forward is the fact that the U.S. government is looking to retain both the technology and manufacturing capacity of Fisker within the U.S.