* 160 layoffs latest symptom of cash crunch
* Fisker: move necessary to "maximize value of core assets"
* Raised $1.2 bln from investors, but cash has dwindled to
* Angry employees file lawsuit in federal court
* Fisker has not made a car since last July
By Deepa Seetharaman
DETROIT, April 5 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
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
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.
Friday's class action is one of several challenges Fisker
has faced over the past month. In March, company founder Henrik
Fisker abruptly resigned, citing "several major disagreements"
with top management.
The lawsuit accuses the automaker of violating the Worker
Adjustment and Retraining Notification or WARN Act, which
requires 60 days' notice for mass layoffs. The lawsuit seeks 60
days' worth of unpaid wages and other benefits, as well as
Jack Raisner, an attorney for the plaintiffs, told Reuters
that the termination is a "harbinger" of likely bankruptcy.
Raisner, who represented employees of Solyndra, the
government-backed solar panel maker that terminated its
employees shortly before filing for bankruptcy in 2011, said
Fisker's current situation is similar to Solyndra's final days.
"It feels like almost deja vu," he said.
The Energy Department's loan program has been under scrutiny
ever since Solyndra's bankruptcy. Since then, other U.S.-backed
companies have gone bankrupt, notably Fisker's battery supplier
formerly known as A123 Systems and now called B456 Systems Inc.
APRIL 22 PAYMENT LOOMS
Fisker, which was founded in 2007, hopes to renegotiate a
DOE loan payment due on April 22, which the source familiar with
Fisker's finances said was around $10 million.
In 2009, the DOE awarded Fisker a $529 million loan as part
of a U.S. program to finance advanced vehicle development.
Fisker pledged its assets, including equipment and property, as
collateral on the DOE loan, according to the loan agreement
dated Sept. 18, 2009.
The company's flagship vehicle, the $100,000-plus Karma
plug-in hybrid, quickly won accolades for its styling and cachet
with celebrities, including pop star Justin Bieber and actor
Leonardo DiCaprio, who is also an investor in the company.
Fisker used $193 million of the DOE loan and earmarked the
rest for a second plug-in hybrid, the Atlantic, but the DOE
froze the credit line after delays in launching the Karma. The
last payment from the DOE came in May 2011.
"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," DOE spokeswoman
Aoife McCarthy said in a statement.
"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," she said.
Fisker has not produced a car since July and has been
seeking a financial backer to help finish the development of the
Atlantic and produce it at a Delaware plant.
Chinese automakers Dongfeng Motor Group Co Ltd and
Zhejiang Geely Holding Group both considered buying a
majority stake in Fisker, but they balked at the terms of
Fisker's loan agreement with the DOE.