Fall of the House of Fisker

100 years ago, almost anyone could become a car manufacturer. The automobile—and the advance in technology to create it—was in its infancy, creating a near level playing field for anyone with an idea and the desire to try their hand. As the years went on, and the segment transitioned into a global industry, the barriers to entry increased and so fewer and fewer were able to take on the challenge—and the huge financial risk. Interestingly, with the recent surge of interest in electric and hybrid vehicles, some of those long-established barriers have been removed, or at least lowered, to allow a number of aspiring new manufacturers to attempt to stake their claim. Some, like Tesla, appear to be getting traction and stand a good chance of making it. Others like Fisker, are suffering the same fate as so many challengers before them. The story of Fisker is interesting to me, because its recent collapse echoes the drama of several historic automotive failures.

Founded by noted designer Henrik Fisker, the company’s hybrid-electric Karma luxury car made its debut in 2008 to much fanfare. Here was finally an electric car that looked like something we would all actually want to own. With the government making huge conditional loans to companies trying to develop this new technology, Fisker received a $528.7 million loan to fund putting the Karma into production. However, mass-producing a car for the market is very different from creating prototypes and limited-edition vehicles. Numerous delays resulted, which pushed back Fisker’s getting EPA certification for the car until October 2011. By the summer of 2012, the government froze Fisker’s loan when certain production milestones, required to satisfy the conditional loan terms, were not met. Without the government funding, production had to cease, resulting in a slowly progressing, downward death spiral, that eventually led to Henrik Fisker being pressured to resign as Chairman on March 13, 2013, and the company’s preparations for bankruptcy beginning as we speak. Fisker’s story bears striking resemblance to that of another automotive upstart by the name of Preston Tucker, some 60 years ago.