Troubled electric vehicle startup Fisker has hired restructuring advisers to assist with a possible bankruptcy filing, according to people familiar with the matter.
Fisker, which recently warned that it risked running out of cash this year, hired financial adviser FTI Consulting and the law firm Davis Polk to work on a potential filing, the people said. The car company reported last month that it had $273 million in sales last year and over $1 billion in debt.
Fisker last month issued a so-called going-concern warning that there was “substantial doubt” about its ability to stay in business. The company said it was negotiating to raise additional cash from investors and looking for a new manufacturing partner in the U.S.
Fisker and FTI Consulting declined to comment, while Davis Polk didn’t immediately respond.
The Manhattan Beach, Calif.-based company in late February delayed the release of its full financial results for last year, because it lacked a sufficient number of experienced accounting professionals, according to a regulatory filing.
Fisker is one of a cohort of once-highflying EV startups that went public at the beginning of the decade, many through special-purpose acquisition companies, or SPACs, that helped fast track their market debuts. Their rise also coincided with a surge of investor enthusiasm for companies that could potentially follow in Tesla’s footsteps and break into the highly competitive auto industry.
Instead, the companies have struggled with the complexities of mass manufacturing and, more recently, with sputtering demand for battery-powered vehicles from American car buyers.
Fisker delivered its first vehicles to U.S. buyers in June, just as worrying signs of a slowdown in sales growth were starting to emerge. The company cut its forecast for demand twice last year and lowered prices citing “competitive realities.”
If Fisker files for bankruptcy protection, it will be the second collapse of a car company founded by former BMW and Aston Martin car designer, Henrik Fisker. The first company, Fisker Automotive, filed for bankruptcy in 2013.
Fisker’s share price has fallen over 97% since it went public in 2020 by merging with a special-purpose vehicle to 32 cents at Wednesday’s close. The company’s shares have traded below $1 for much of the year and are at risk of being delisted from the New York Stock Exchange.
The current iteration of Fisker, run by Henrik Fisker and his wife Geeta Gupta-Fisker, went public with a plan to challenge key tenets of how cars are built. Instead of building a factory and employing workers, Fisker outsourced production of the Ocean SUV, the company’s sole vehicle, to contract manufacturer Magna Steyr in Graz, Austria.
The strategy was supposed to help avoid many of the pitfalls that sank Henrik Fisker’s first company, by keeping operating costs lower.
But Fisker still struggled almost as soon as it began producing vehicles as it faced challenges getting its Ocean SUV from a factory in Austria to customers in the U.S. The company said it had regulatory approval delays, parts issues and turnover in its executive ranks—especially in its finance division.
At the start of the year, Fisker said it was switching from a Tesla-inspired direct-to-consumer sales model, in favor of traditional dealerships, after it found it was too expensive and time-consuming to build out its own network for stores and service centers.
Fisker said last month it would lay off 15% of its workforce, mostly from its service and retail-sales divisions.
The Ocean also has had quality issues, with the National Highway Traffic Safety Administration investigating customer reports of the Ocean rolling away or a loss of braking performance. Fisker has said that the braking issue was resolved with a software update and that it was fully cooperating with NHTSA on its investigation.
Last month, Fisker said it missed its production target of at least 13,000 units last year, manufacturing a little over 10,000 vehicles. The company delivered around 4,900 vehicles to customers.
Fisker executives partly blame the complexities of the direct-sales system for its sluggish growth in sales.
Employees have been working to offload the nearly 5,000 vehicles it has in stock, which are worth roughly $500 million, according to the company. Fisker has said it wanted to sell all the vehicles by the end of March, in part by signing up new franchise dealerships.
Meanwhile, the launch of Fisker’s future products, a $30,000 crossover and a pickup truck, are dependent on the company’s ability to negotiate a new contract manufacturing agreement in the U.S.
Fisker has said it is negotiating with a “large carmaker” for a potential investment and joint manufacturing agreement, which would allow the startup to produce new vehicles in the U.S.
In its going concern warning last month, Fisker said that if it was unsuccessful at raising additional funds, it could have to scale back its manufacturing plans and spending on future vehicles.
