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 US$1.2 billion from investors and tapped nearly US$200 million in government loans, has “at least” US$30 million in cash on hand, according to a source familiar with the company’s finances.
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.”
The layoffs, which hit departments including engineering, public relations and marketing, are the latest symptom of Fisker’s cash crunch.
Late last month, Fisker put its entire US workforce on furlough. It also hired law firm Kirkland & Ellis to advise on a possible bankruptcy filing.
Friday’s class action is one of several challenges Fisker has faced over the past month.
Last month, 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 Act, which requires 60 days’ notice for mass layoffs. The lawsuit seeks 60 days’ worth of unpaid wages and other benefits, as well as interest.
Jack Raisner, an attorney for the plaintiffs, said 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 US Department of Energy’s (DOE) loan program has been under scrutiny ever since Solyndra’s bankruptcy. Since then, other US-backed companies have gone bankrupt, notably Fisker’s battery supplier, formerly known as A123 Systems and now called B456 Systems Inc.
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 about US$10 million.
In 2009, the department awarded Fisker a US$529 million loan as part of a US program to finance advanced vehicle development. Fisker used US$193 million of the loan and earmarked the rest for a second plug-in hybrid, the Atlantic, but the department froze the credit line after delays in launching the flagship vehicle, the US$100,000-plus Karma plug-in hybrid. The last payment from the department came in May 2011.
Fisker has not produced a car since July last year and has been seeking a financial backer to help finish the development of the Atlantic and produce it at a Delaware plant.