Electric Vehicle Manufacturer Facing Bankruptcy, Negotiates For Lifeline

It’s undeniable that the environment is incredibly important to discuss, both for now and for the future. The planet is warming at unprecedented levels due to human interference, and taking a stand now is the only option to prevent the planet from growing unlivable for humans. There are many methods that are being used to tackle climate change and environmentalism, and all of them are facing unique challenges.

Conversations Around the Environment

One of the biggest conversations around environmentally friendly science regards cars, and the fossil fuels that are used to make gasoline. Cars are one of the biggest contributors to global warming on the planet, and addressing the fossil fuels that are used to run cars would go a long way towards mitigating climate change.

Due to this, it’s unsurprising that a hot topic of discussion regarding the environment is electric cars. Electric cars are not a new phenomenon, but the conversation around them has ramped up in recent years as it’s become increasingly apparent how dire the situation regarding the environment is. 

Old Technology

Electric cars have existed in some capacity or another since the late nineteenth century, but they grew more popular in the late 1990’s with the creation of hybrid vehicles. Battery electric cars did not become practical options for the consumer market until the 2010’s, making the move to electric cars a fairly recent happenstance. 

Because of the benefits regarding electric cars in terms of the environment, there are incentives to purchase electric cars over gasoline cars in many areas. While this has incentivized more consumers to choose electric than may have before, cost is still an unfortunate burden that is stopping many from going electric. 

Infrastructure Stands in the Way

Another major roadblock when it comes to more Americans adopting electric cars is infrastructure. Currently, Tesla is the company with the most extensive infrastructure for their electric cars installed around the country, with more charging stations being installed every year.

Tesla is not the only company that sells electric cars, though, and unfortunately for many of these other companies, the infrastructure needs have not caught up with the desire for electric cars. Significant investments need to be made before electric is a viable option for all Americans, particularly those who live in rural areas.

Federal Investments in Infrastructure

This is where the federal government comes in. President Biden campaigned on improving green energy in the country, and it’s a talking point that resonated deeply with liberals and younger voters in particular. Climate change is an issue that is deeply important to younger Millennials and Gen Z, which is a good chunk of Biden’s voter bloc.

Since taking office, Biden has made significant strides towards investing in green energy and infrastructure. His bipartisan infrastructure bill made once-in-a-generation investments into roads, bridges, internet, and, yes, green energy.

Target Goals for Electric Cars

At the same  time as the bill was passed, Biden announced target goals for electric vehicle sales. He stated that his administration was working with electric vehicle manufacturers and the greater car industry as a whole to push electric cars, with the goal that 50% of all car sales would be electric by the year 2030.

Many experts in the auto industry have said that this is an overly ambitious target. Not because there isn’t a desire for electric cars, but simply because the market has not caught up to the environmental need. The desire for electric cars is growing – electric vehicles made up nearly 8% of total car sales in 2023 – but until the consumer confidence and infrastructure is there, the push for electric car sales will continue to fall flat. 

Electric Car Manufacturers Struggling

Because of this, it’s not a surprise that some major electric car manufacturers are struggling. While companies such as Ford and Nissan have come out with their own electric vehicles in recent years to sell alongside their gasoline engines, and companies like Tesla have made their name in the electric car space, there are other companies that are simply not keeping up. 

This is true especially for smaller startup companies, such as Lordstown Motors. Sales have slowed and companies have been forced to cut back on production plans because of this, and it has resulted in Lordstown Motors being forced to file for Chapter 11 bankruptcy in July of 2023 to restructure and sell its assets.

Bankruptcy as an Escape Hatch

Chapter 11 bankruptcies are typically referred to as a “reorganization” bankruptcy. Usually, the debtor remains “in possession,” has the powers and duties of a trustee, may continue to operate its business, and, with court approval, may possibly be allowed to continue borrowing new money.

After the paperwork is filed, a plan of reorganization is proposed. Creditors whose rights are affected may vote on the plan, and the plan may be confirmed by the court if it gets the required votes and satisfies certain legal requirements.

Winning Bankruptcy Confirmation

Lordstown won confirmation of its Chapter 11 plan on March 5, meaning that it was ready to emerge from bankruptcy and start fresh with a new business direction. However, many companies who are currently struggling are not as lucky as Lordstown. 

Fisker is another electric vehicle company that has been forced to make difficult decisions recently. Significantly, they made the difficult choice to pause production of their vehicles for six weeks beginning on March 18. 

A Delay in SEC Filing

Fisker was founded in 2007 by Henrik Fisker, a Danish automotive designer and entrepreneur. In the March 1 filing with the SEC, he stated that it would be late in filing its 10-K annual report for the year ending Dec. 31, 2023.

He went on to further explain that the company had undergone a change in key accounting personnel, and needed more professionals with accounting training and knowledge to complete the report, which was due on February 29. 

Decreases in Expenditures and Working Capital

Fisker said that the company had identified material weaknesses in revenue and related balance sheet accounts, and that they expected capital expenditures and working capital requirements to decrease in 2024 and beyond.

This announcement comes as the company enters the second year of production for the Fisker Ocean, which has endured a particularly difficult road from production to release. The Ocean has had a significant number of build and software issues reported since it was made public, which has led to some of the issues the company appears to be dealing with. 

Fourth Quarter Losses

Fisker announced a fourth-quarter loss of $1.23 per share, which was well beyond the projected loss of a 22-cent loss per share. Chief Financial Officer of the company, Geeta Gupta-Fisker, told analysts, “There is substantial doubt about our ability to continue the going concern when we file our 10-K with the SEC.”

She added, “2023 was a much more challenging year than we anticipated. However, I can assure you that everyone at Fisker is working extremely hard around the clock.”

Securing Financial Commitments

In addition to pausing its production, Fisker also announced that it had secured a financing commitment from an existing investor of “up to $150 million.” It confirmed that it is in negotiations for investment in the company with “a large automaker,” joint development of one or more electric vehicle platforms, and North American manufacturing.

According to Reuters, the company in question is Nissan, which said the deal could provide the automaker with access to an electric pickup truck, while giving Fisker a financial lifeline at the same time. 

A Hopeful Future

The road to success is not a straight line, which is a fact that Fisker acknowledges. Even with the investments that the company has secured, it is entirely possible that the startup will continue to struggle in a competitive market.

Fisker seems hopeful for the future of the company, as well as the future of the Ocean. The electric vehicle is highly competitively priced, meaning that if they can manage their finances appropriately, they could hit the American market with a quality product within budget for Americans, soaring their projected earnings and far making up their losses.