EV startup Fisker announced a six-week halt in the production of its Ocean SUV, as the company seeks urgent financial support.
In a regulatory filing on Monday morning, Fisker revealed a dire financial situation, with just $121 million in cash and cash equivalents on hand as of March 15th, of which $32 million is restricted. The company’s accounts payable have ballooned to $182 million, casting “substantial doubt” over its ability to continue operations without securing additional funds. This warning follows a February announcement hinting at the likelihood of such a dire financial forecast.
The halt comes at a critical juncture for Fisker, which became a public entity in 2020 through a merger with a special purpose acquisition company. Despite launching the Ocean SUV in the U.S. and Europe in mid-2023, Fisker has encountered significant challenges, including software issues and customer service complaints, as reported by TechCrunch.
Additionally, the National Highway Traffic Safety Administration is investigating the Ocean SUV for potential rollaway and braking system problems. In response to these hurdles, Fisker reduced its workforce by 15%, equivalent to approximately 200 employees, in February.
By the end of 2023, Fisker reported shipping about half of the 10,000 vehicles produced by its manufacturing partner, Magna Steyr. With 1,300 vehicles delivered in the first two months of the year and an inventory of roughly 5,000 units in the U.S. and Europe, Fisker is now exploring a shift from direct sales to dealership partnerships.
However, this transition has seen at least one early dealer partner sever ties with the startup. Amid these challenges, The Wall Street Journal recently disclosed Fisker’s consultation with restructuring advisers to assess bankruptcy options.
The path to financial recovery appears daunting for Fisker, particularly given the high costs associated with automotive manufacturing. Despite outsourcing significant production aspects to Magna, Fisker depleted its cash reserves by approximately $200 million over the last 11 weeks of 2023, with Magna producing no vehicles in January and only 1,000 since February.
Fisker is currently in talks with an automaker, rumored by Reuters to be Nissan, regarding a potential partnership and investment. Additionally, the company is attempting to raise $150 million through convertible notes, although this agreement is pending and contingent on several conditions.
Compounding its financial woes, Fisker disclosed its failure to submit its 2023 annual results on time, including missing a 15-day SEC extension deadline on March 15th. This oversight triggered a default in one of its convertible note agreements, although the investor has temporarily waived the default. Nonetheless, the investor retains the option to convert the outstanding note amount, exceeding $300 million as of late January, into shares.
Surviving the auto industry is not easy, especially when it comes to producing and delivering electric vehicles. Fisker is in a bad situation here, but in the end, capitalism is cruel.
