Fisker’s Woes Continue

FiskerKarma
FiskerKarma

Fisker Automotive, the makers of the ultra luxurious sedan nicknamed the Karma, has had tragedies experienced one after the other. Because of the series of misfortunes that has befallen the car manufacture, one now seems to wonder as to the wisdom of naming its maiden vehicle as the Karma.

One of the most recent disasters the company has been with Hurricane Sandy, where 338 of their Karmas were lost when the Port of Newark was flooded. The vehicles, after being submerged, caught fire, resulting in the total loss of the luxury sports cars.

In a recent turn, the insurer of these Karmas is refusing to pay for the lost vehicles, leaving Fisker with no choice but to seek damages in court. According to reports, Fisker Automotive’s policy with insurer the XL Group PLC allows entitlement of up to U.S. $100 million for damages occurred through named storms, an example would be Hurricane Sandy. This amount though is still subject to a deductible and other provisions in the policy. The value of the lost Karma vehicles then housed at the port at the time of the storm totaled U.S. $33 million.

The bone of contention for the refusal of the claim is the determination whether or not the vehicles are considered ‘in transit’. The said vehicles were awaiting shipment to dealers at the time of the loss.

When the vehicles are considered as such, then other provisions and sublimits as to the indemnity applies. Fisker alleges that the insurer must cover the loss, as well as breach of contract for their refusal to pay the amounts stipulated in the insurance policy. The case was filed in the New York State Supreme Court in Manhattan.

When Hurricane Sandy hit the Port of Newark in New Jersey, there were more than 10,000 vehicles currently in storage. The amount of the loss is considered as the second costliest in U.S. history after only the swath of damage caused by Hurricane Katrina.

This is just one of the problems that Fisker Automotive has experienced in 2012, such as fires in its vehicles, production recalls and delays, funding issues, poor reviews of its Karma, and massive layoffs of its personnel. The lukewarm response by the market of the U.S. $100,000 plug-in hybrid vehicle does not help its cause one bit. Its follow up vehicle named the Atlantic has sputtered in production because of financial shortcomings for the company.

The Year That Was

Electric Car
Electric Car

The year was marked with major turmoil and the survival of the fittest in terms of the electric car revolution. The major companies include A123 Systems, Fisker Automotive and Better Place.

One of the most noted struggles were three major companies that are aiming to be on the forefront of the electric car revolution. A123 Systems is a battery maker, Better Place, is a battery replacement/recharging business and Fisker Automotive is a luxury electric car builder. These three alone represent billions of dollars of investments and unfortunately, they as individual businesses, are facing both commercial and financial issues moving forward.

While each company represents a different area of the electric car revolution, the slow rate of adoption by the general public is what is bogging down the success of these companies. The cost of creating the next generation batteries and electric cars still remains prohibitively expensive. Examples would be Better Place’s layoffs in Israel, as its commercial turnaround is much lower than initial projections. The total round of layoffs can reach as high as 350 employees by year’s end. It was only able to register double digit sales in the country where it boasts of close ties to the Israeli government and a major government subsidiary, Israel Corp.

Better Place was launched back in 2007 and its main product is a electric charging infrastructure and support battery swap stations. Its other businesses include selling electric car chargers and a government subsidized electric car. While initially it was able to raise money and lay the groundwork in Israel and Denmark through its partnership with Nissan, the company has since floundered with the high capital expenses needed to be disbursed to build its networks. It was able to raise nearly U.S. $100 million but the capitalists grew tired of losing money and thus their future in 2013 is quite grim.

Another superstar in 2012 was Fisker Automotive, with its ultraluxury vehicle the Karma. It is now on life support, seeking a partner, acquirer and/or investor so that it can continue onto its next model, the Atlantic. It has since stopped building the Karma, as recalls conducted in 2012 as well as the major losses during the last hurricane that hit New York has put the company on the ropes in terms of its future. Much of its fund raising activities with investors has been marred with charges of misrepresentation, leading to many angel investors wary of putting money in the company’s coffers.

The third major company making headlines this year, even making it an election issue was A123 Battery Systems, which recently declared bankruptcy. Much of its assets though has been subject to an auction between Johnson Controls and Wanxiang. Because of the large Energy Department grant received by A123 during its heyday, as well as its military contracts, allowing a Chinese company such as Wanxiang to seize control has made many nervous about the company and the industry’s future. A123 was hit hard by Fisker cutting back on its orders, creating a sort of domino effect that has cast a long shadow on the future of the electric revolution in 2012.

Fisker Karma Blamed for Home Fire

FiskerKarma
FiskerKarma

According to unofficial reports from the Fort Bend County Texas Fire Department, an unplugged Fisker Karma sedan had caused a fire in a home in the area resulting in about U.S.$100,000 structural damage costs.

The photos from the fire scene showed that the electric vehicle was almost consumed by the fire but the lithium ion battery pack remained intact. While the fire investigators have already identified the cause of the blaze, the investigation continues on the full extent of the fire.

According to Chief Fire Investigator Robert Baker, “Yes, the Karma was the origin of the fire but what exactly caused that, we don’t know at this time.” He further related that the driver arrived home riding the Fisker. He pulled into the garage and about three minutes later, the car was up in flames. The electric vehicle was not plugged in when the car was engulfed in flames, but the Karma battery remained intact. The owner related that right before the fire, there was a smell of burning rubber in the vehicle.

Baker further added, “The car was brand-new. He still had paper tags on it, so it was sixty days old at most.” It was later found that this particular Karma was a post-recall vehicle bought back in April.

The resulting damage to the garage was assessed as substantial, which spread to the second floor of the home. No injuries resulted from the incident and the home was apparently new, with the owner just moving into the residence. The damage was estimated at about U.S.$100,000, without the cost of the two other vehicles damaged in the garage which were a Mercedes Benz SUV and an Acura NSX.

The investigator quipped, “This looks just like golf cart fires we have down here.” He was referring to the extent of the fifty or so golf cart fires this suburban Houston area experiences annually.

He did observe that the fire scene was crawling with about fifteen engineers from the company finding the cause of the fire in the Karma.  The official statement of Fisker Automotive is as follows:

Last week, Fisker Automotive was made aware of a garage fire involving three vehicles, including a Karma sedan, that were parked at a newly-constructed residence in Sugar Land, Texas. There were no injuries.

There are conflicting reports and uncertainty surrounding this particular incident. The cause of the fire is not yet known and is being investigated.

We have not yet seen any written report form the Fort Bend fire department and believe that their investigation is continuing. As of now, multiple insurance investigators are involved, and we have not ruled out possible fraud or malicious intent. We are aware that fireworks were found in the garage in or around the vehicles. Also, an electrical panel located in the garage next to the vehicles is also being examined by the investigators as well as fire department officials. Based on initial observations and inspections, the Karma's lithium ion battery pack was not being charged at the time and is still intact and does not appear to have been a contributing factor in this incident.

Fisker will continue to participate fully in the investigation but will not be commenting further until all the facts are established.

Is this Karma or what?