Luxury hybrid car maker Fisker Automotive has spent $660,000 in taxpayer dollars and venture capital funds for each car it sold – totalling $1.3 billion, according to a report. The company’s Fisker Karma sold for about $103,000 per vehicle, meaning the company took a hit of $557,000 every time it sold its product.
The company was also allowed to continue to draw down on a $529 million Department of Energy loan after violating the loan’s term multiple times, according to a report by the New York-based research firm PrivCo.
According to the report, the Department of energy knew that Fisker was not meeting goal required to keep receiving taxpayer dollars. The DOE cut off funding to the company in June 2011, allowing taxpayers to lose $193 million.
“They made a mistake” in giving Fisker the loan, PrivCo Chief Executive Officer Sam Hamadeh told the Denver Post. “Should they have fought this sooner? Obviously – as soon as it became evident that they had begun to default.”
It has been reported that Fisker is circling the bankruptcy drain and has hired the law firm Kirkland & Ellis LLP, which has one of the largest bankruptcy practices in the country, to handle a potential bankruptcy. A crisis PR firm, Sitrick & Co., also reportedly is assisting the beleaguered car maker.
The company stopped manufacturing cars last year and has a $20.2 million payment to the Energy Department due on April 22.
Consumers purchased 1,600 Fisker Karmas. Another 338 of the luxury hybrid cars – worth more than $33 million – were destroyed in a parking lot during Superstorm Sandy.
Hamadeh said that technical defaults began in 2011 in part due to “lower-than-required earnings before interest, taxes, depreciation and amortization, and failing to meet a production milestone of at least 11,000 vehicles sold to dealers for an average of $87,500 by Sept. 30, 2011,” according to the Denver Post.
However, the DOE says it acted responsibly in cutting off the company’s funding and argued that PivCo’s report was flawed and contained errors.
“The Department of Energy stopped payment on the federal loan in 2011 after Fisker stopped meeting their milestones, and is committed to the best outcome for taxpayers,” said Bill Gibbons, a DOE spokesman. “Despite Fisker’s difficulties, our overall loan portfolio of more than 30 projects continues to perform very well, and more than 90 percent of the $10 billion loan loss reserve that Congress set aside for these programs remains intact.”
“PrivCo’s assertion that Fisker defaulted in December 2010 is simply false,” said Gibbons. “The milestones that PrivCo includes in its report are also wrong. The fact is, the department stopped disbursements on the loan after the company stopped meeting its milestones.”
Republicans have already attacked the DOE’s loan program because of other high-profile failures and levied allegations of cronyism.
Fisker does not lack for political clout, though. The Fisker Karma has been sported by celebrities such as Al Gore, Justin Bieber, and Leonardo DiCaprio.
The venture capital firm Kleiner, Perkins, Caufield and Byers – where Gore is a partner – was a seed investor in the company and spent $400,000 in 2009 and 2010 on lobbying. The firm lobbied in favor of the stimulus bill that handed out $90 billion for green energy programs.