BEIJING In late January, consultant Joel Ewanick arrived at Geely's headquarters in eastern China to deliver an impassioned pitch on behalf of Fisker Automotive, the California-based boutique green-car maker that was running out of cash and sliding toward bankruptcy.
Ewanick, a former General Motors Co and Hyundai marketing executive, walked Geely Chairman Li Shufu through the pros and cons of taking a majority stake in Fisker. He suggested Geely could take control for as little as $250 million, about an eighth of Fisker's self-estimated value in late 2011.
"Chairman Li's eyes got big, and it was as if, ‘that's all!?'" according to one of the people who attended the meeting.
The deal ultimately fell apart for many reasons, including hard-to-meet terms of Fisker's U.S. government loan. But the outcome was also the result of missteps by Fisker's top managers, including openly appearing to favor a rival Chinese automaker early on, according to eight individuals with direct knowledge of the effort over the past year.
By betting on the wrong company as its potential white knight, Fisker may have bungled an opportunity to raise hundreds of millions of dollars. Fisker's board sent out at least two search teams, but proceeded without a clear roadmap or coordination between the teams, those knowledgeable individuals told Reuters.
The events show how Fisker's last-ditch bid for survival has been just as messy as the mismanagement that led the company to burn through more than $1.4 billion in public and private funds in less than six years.
Now five months later, Fisker continues to stave off bankruptcy, but it is fielding bids a tenth the size of Ewanick's proposal to Geely. The company also risks making the same errors in judgment and derailing even those smaller offers, people close to the company said.
THE CHINA MANDATE
Fisker's suitor search began in earnest last August when Joseph Chao was named the head of operations in China, the world's biggest auto market. One of his main tasks was to lead the search there for new strategic investors - and a potential buyer.
Chinese companies had begun buying up the troubled assets of Western automakers to expand their presence on the global stage and gain access to more advanced technology. In 2010, Zhejiang Geely Holding Group acquired Sweden's Volvo Car from Ford Motor Co. Wanxiang Group bought Fisker's battery maker, A123, in 2012.
Chao wasn't the only one looking for a partner or buyer. Fisker also had hired Ewanick as interim chief commercial officer and tasked him with finding a potential suitor, a quest that took him to China and Korea.
While Chao focused on China's state-owned Dongfeng Motor Group, one of China's four largest vehicle manufacturers and a partner of Nissan Motor, Honda Motor, Kia Motors and Peugeot-Citroen, Ewanick concentrated on Geely and Beijing Automotive Industry Holding Co.
Joining Chao in pursuing Dongfeng was former General Motors engineer Tony Posawatz, who was named Fisker CEO in August. Posawatz did not return calls seeking comment.
At Geely headquarters in Hangzhou, Ewanick's meeting segued into a multi-course lunch with bottles of French wine in the company's executive dining room. Over lunch, Li agreed to consider the deal and promised to move quickly.
Li assembled a team of Chinese executives from Geely, Volvo China and Geely's main investment bank, who put together a two-fold turnaround plan: Use a former GM plant in Delaware, now owned by Fisker, to produce Volvo and Geely cars, as well as the long-gestating Fisker Atlantic sedan, and use Fisker's engineering and design expertise to develop plug-in hybrids for Geely and Volvo.
At Fisker's Anaheim headquarters in February, Geely's due diligence team was "serious" and "asked smart questions," people familiar with the matter said. Dongfeng's due diligence team, in contrast, moved slowly. A Fisker employee in Anaheim who helped host the Dongfeng team said the Chinese didn't ask many questions: "It felt more like those guys were there on holiday."
On March 13, Henrik Fisker resigned from the company, citing major disagreements with other executives and board members. By the end of March, it was clear that neither Chinese company would bid. Within weeks, Fisker fired 75 percent of its U.S. workforce in a last-ditch effort to save cash.
The Chinese government told state-owned Dongfeng not to go alone on the deal, according to a source close to Dongfeng. It also preferred Dongfeng bid jointly with Geely, this person said.
The Chinese government also wanted production of Fisker cars moved to China, but concluded that wouldn't be possible because of the terms of Fisker's U.S. Department of Energy loan. The restrictive terms of the DOE loan and the amount of work needed to overhaul the Delaware plant also helped convince Geely not to submit a final offer.
People close to Fisker worry the company is about to repeat the same errors. Investors, led by Hong Kong billionaire Richard Li, are looking to buy out the DOE's loan for pennies on the dollar. The unusual strategy would allow Fisker to avoid bankruptcy, an outcome favored by other investors.
As a result, Fisker has still not acted on a competing offer from Chinese auto parts supplier Wanxiang and VL Automotive, a joint venture between former General Motors executive Bob Lutz and Michigan industrialist Gilbert Villarreal.
Meanwhile, the company's value is dropping by the day.
(Reporting by Norihiko Shirouzu in Beijing; Additional reporting by Deepa Seetharaman in Detroit; Editing by Claudia Parsons and Leslie Gevirtz)