(Reuters) - Fisker Automotive Inc, which has not built a vehicle since July, has the potential to succeed and repay nearly $200 million in government loans if the “green” car maker is able to find the right “financial and strategic resources,” according to former CEO Henrik Fisker.
Problems with the parts suppliers, delays in regulatory approval and recalls of its flagship Karma plug-in hybrid sports car were among the issues that dogged the automaker over the last few years, Fisker plans to tell lawmakers during a congressional committee hearing later on Wednesday.
“After resolving initial launch challenges, the cars perform well and customers love them,” according to a copy of Henrik Fisker’s testimony to the panel. “Fisker still has the potential to build on these achievements if the company can secure financial and strategic resources.”
The House Oversight and Government Reform committee will focus on the U.S. Department of Energy’s (DOE) decision to grant Fisker Automotive a $529 million loan in 2009.
The hearing comes as the automaker verges on collapse. Among the key questions is whether Fisker’s prospects were strong enough at the start to warrant the DOE’s backing, which helped trigger a flood of private financing for Fisker.
Fisker’s failure to make a payment on the DOE loan on Monday is the latest of its troubles. In recent weeks, Fisker has fired 75 percent of its workforce and hired bankruptcy advisers.
“The Obama Administration owes the American taxpayer an explanation as to why this bad loan was made in the first place, and what they are going to do to minimize the loss that taxpayers face,” said Ohio Republican Jim Jordan, chairman of the subcommittee holding Wednesday’s hearing.
Henrik Fisker founded the company in 2007 and abruptly resigned as executive chairman in March. “While the company retains my name, we are not one and the same,” Fisker will say, according to his testimony.
Nicholas Whitcombe, supervisory senior investment officer for the DOE loan program and Fisker co-founder Bernhard Koehler will also testify at the hearing.
The DOE’s early public support helped open doors for Fisker, which sells the $100,000-plus Karma plug-in hybrid sports car. Fisker has raised $1.2 billion in private funds to date, according to SEC filings.
The 2009 loan signaled that the DOE had done a rigorous review of the project, said Salo Zelermyer, a senior counsel at the DOE under the Bush administration who also helped create the auto loan program. The loan program was funded in late 2008.
“It’s fair to say the projects the DOE chose to proceed with were clearly given an added credibility with folks on the outside,” said Zelermyer, now a senior counsel at Bracewell and Giuliani in Washington.
Fisker never received the full $529 million loan. It tapped $192 million before the DOE quietly decided to freeze Fisker’s credit line in June 2011 when it became clear that Fisker would not meet performance milestones as part of the loan agreement.
Neither the DOE nor Fisker publicly disclosed that decision until early 2012. Lawyers and a DOE official said the department was not obligated to divulge its decision on Fisker.
In the confidential “information statement” sent to shareholders in December 2011 and obtained by Reuters, Fisker said it “will not meet certain financial covenants and project milestones” required in the DOE agreement, including earnings, net worth and certain financial ratio targets.
Fisker’s troubles come after a string of green technology flops, including last year’s bankruptcy of Fisker’s lithium-ion battery supplier, A123 Systems.
Forecasts in 2009 for the sale of hybrid and electric vehicles far outstripped subsequent demand.
”I‘m not sure there is anything anyone can say or do to help Fisker,“ said Theodore O‘Neill, an analyst with Litchfield Hills Research LLC. ”The company is adrift without Henrik.
“The supply chain is broken, so they can’t get parts on credit anymore, and while it is one of the most beautiful cars on the road, there is insufficient demand,” he added.
Lawmakers may raise questions about the relationship between the DOE and Fisker, which has been strained in recent months, people familiar with the matter have said.
The terms of Fisker’s pact with the DOE were enough to put off potential suitors, including Chinese automaker Geely Automobile Holdings Ltd (0175.HK). The conditions included an obligation to restore capacity and jobs at the company’s Delaware plant according to a schedule imposed by the U.S. government.
Officials with Fisker could not be reached for comment.
Reporting by Deepa Seetharaman and Paul Lienert in Detroit, Ayesha Rascoe in Washington and Nichola Groom in Los Angeles; editing by Matt Driskill and Matthew Lewis