California-based electric vehicle maker Fisker has filed for Chapter 11 bankruptcy protection in the District of Delaware. This decision, announced on June 17, comes as the company faces significant financial challenges and seeks to restructure its operations.
The company is currently in advanced discussions with financial stakeholders to secure debtor-in-possession financing and to facilitate the sale of its assets, according to a press release by the company announcing the filing.
“Fisker has made incredible progress since our founding, bringing the Ocean SUV to market twice as fast as expected in the auto industry and making good on our promises to deliver the most sustainable vehicle in the world,” a Fisker spokesperson said in the press release.
“But like other companies in the electric vehicle industry, we have faced various market and macroeconomic headwinds that have impacted our ability to operate efficiently.”
The company said that after evaluating all options, it determined the sale of assets under Chapter 11 was the most “viable path forward.”
The company had previously announced a six-week pause in production of its only vehicle, the Fisker Ocean, beginning on March 18, which has since been extended and will remain in place as part of the bankruptcy proceedings.
The pause in production was announced in March to “align inventory levels and progress strategic and financing initiatives.”
The company intends to file customary motions with the Bankruptcy Court to ensure its reduced operations can continue, including paying employee wages and benefits, preserving certain customer programs, and compensating necessary vendors on a go-forward basis.
Growing Financial Woes
The announcement of bankruptcy comes after a prolonged period of financial instability for the electric vehicle maker based in Manhattan Beach, California.Fisker had been struggling with its finances, culminating in a default on a loan following a missed $8.4 million interest payment earlier this year. This default was reported in the company’s year-end report to the Securities and Exchange Commission (SEC) filed on April 23.
“We have concluded there is substantial doubt as to our ability to continue as a going concern,” Fisker wrote in a filing with the SEC at the time.
The company at the time said if it couldn’t secure relief from its debt holders and obtain sufficient funds to meet its obligations, it expected to file for bankruptcy by mid-June.
Fisker, co-founded in 2016 by renowned Danish automotive designer Henrik Fisker, was once valued at $2.9 billion.
However, extensive operational and investment expenditures have significantly depleted its resources. The company spent approximately $900 million in cash last year, reducing its cash balance to around $326 million by year-end, which further dwindled to approximately $54 million by mid-April.
In an attempt to address its financial woes, Fisker had been exploring various avenues, including raising additional debt or equity financing, partnering with other manufacturers, and selling vehicles.
Despite delivering more than 6,400 units of its Ocean SUV, which has garnered several awards for its design, these efforts proved insufficient to stabilize the company.
The Ocean, a five-passenger electric vehicle, targets the premium EV market for luxury SUVs, competing with models such as the Tesla Model 3 and BMW X3 Series.
Fisker’s strategy included significant price reductions for its 2023 Ocean models, with some trims discounted by as much as $30,000.
Fisker continues to seek dealer partners in North America and Europe as it transitions to a dealer partner model.
Mr. Fisker, who also serves as the company’s chairman of the board and CEO, has a storied history in automotive design, having developed the Fisker Karma, a luxury plug-in hybrid, as well as the BMW Z8 and Aston Martin DB9/V8 Vantage.
Fisker has faced fierce competition and legal challenges, including a notable lawsuit by Tesla CEO Elon Musk in 2008. Mr. Musk accused Mr. Fisker of breach of contract while he was working to help style Tesla’s Model S before launching his own company.
