Fisker going bankrupt? UPDATE Fisker Automotive could file for bankruptcy protection as soon as this week as the U.S. Department of Energy pressures the green-car startup to pay back nearly $200 million in government loans.
The DoE appears to be pushing a Chapter 11 filing soon by Fisker, several sources close to the company said on Monday. Fisker's attorneys have drawn up bankruptcy documents and are ready to file in the next few days, one of the sources said.
Fisker's board of directors will discuss its options at a meeting on Tuesday morning, one of the sources said. Directors, who have not given up on a possible sale, are expected to make a decision on the timing of a possible Chapter 11 bankruptcy filing at that time, the source said.
The relationship between the DoE and Fisker has been strained in the last several months at a time when top Fisker executives have been trying unsuccessfully to attract buyers, mainly in China and Europe, to stave off bankruptcy.
"They want to get it in the past so that the next DoE secretary doesn't have to deal with it," one source close to the talks said of the government's desire to distance itself from Fisker's well-publicized financial struggles. "They want to basically force the issue."
A DoE spokeswoman was not immediately available for comment. A Fisker spokesman did not immediately respond to a request from Reuters for comment.
Fisker, maker of the $100,000-plus Karma hybrid sports car, has not built a vehicle since last summer and has failed to secure a buyer as its cash reserves have dwindled.
On Friday, Fisker laid off 75 percent of its U.S. workforce, retaining about 50 senior managers and executives, to conserve enough cash to avoid breaching a covenant in its agreement with the DoE, people familiar with the matter said.
Fisker now has about $30 million in cash on hand and faces a $10 million loan payment to the DoE on April 22, sources said.
The DoE awarded Fisker a $529 million loan in 2009 as part of a U.S. program to fund advanced vehicle development. Fisker pledged its assets as collateral on that loan.04/06/13 Yet another Obama Administration supported 'green' company is headed for bankruptcy as more American taxpayer dollars get wasted. Fisker Automotive, the struggling government-backed hybrid sports car maker, on Friday terminated most of its rank-and-file employees in what sources said was a last-ditch effort to conserve cash and stave off a potential bankruptcy filing.
Fisker, which raised $1.2 billion from investors and tapped nearly $200 million in government loans, has "at least" $30 million in cash on hand, according to a source familiar with the company's finances.
About 160 workers were fired at a Friday morning meeting at Fisker's Anaheim, California, headquarters, according to a source who attended the meeting. They were told that the company could not afford to give them severance payments.
Fisker confirmed in a statement that it let go about 75 percent of its workforce but did not specify the number of workers affected. It called the move "a necessary strategic step in our efforts to maximize the value of Fisker's core assets."
"Unfortunately we have reached a point where a significant reduction in our workforce has become necessary," Fisker said, adding that it was still searching for a strategic partner.
The mass termination triggered a lawsuit seeking class-action status from angry former employees. A lawyer for the fired employees said he expects the company to file for bankruptcy "sooner rather than later."
A Fisker representative could not immediately answer questions on the company's financial position. In the past, the automaker has declined to comment on the possibility of a bankruptcy restructuring.
The layoffs, which hit departments including engineering, public relations and marketing, are the latest symptom of Fisker's cash crunch. In late March, Fisker put its entire U.S. workforce on furlough. It also hired law firm Kirkland & Ellis to advise on a possible bankruptcy filing.
Fisker asked 53 senior managers and executives to stay on board, primarily to pursue buyers for the company's assets, according to the source who attended Friday's meeting in Anaheim. The remaining Fisker executives also are continuing negotiations with the U.S. Department of Energy.