Fisker Automotive has laid off 26 workers in Wilmington and will delay construction of its Project Nina hybrid-electric car factory there because it has to renegotiate the terms of a loan with the U.S. Department of Energy, the company said on Monday.
Fisker missed DOE deadlines on emissions certification, production and sales of its existing Karma model so has to set new “milestones” with the federal government in order to qualify for $336 million in loans relating to its new car – dubbed Project Nina – to be built on the site of the old GM plant on Boxwood Road, said Fisker spokesman Roger Ornisher.
“We have temporarily delayed work at the plant based on ongoing discussions with the DOE regarding funding for the Project Nina program,” the company said in a statement issued from its Anaheim, Calif., headquarters. “As a result we have laid off 26 people.”
Some other employees were laid off at the California location.
Ornisher said Fisker was five or six months later than planned in obtaining emissions certification for the Karma, which is currently made in Finland. He declined to say by how much the company missed the production and sales targets it had agreed with the DOE, or whether it was late in meeting them.
Until Fisker and the DOE are able to agree new “milestones”, the government money will not be available, Ornisher said.
“We can’t keep putting money into Delaware until we’ve agreed on the rest of the money from the DOE,” Ornisher told DFM News.
The delay is another setback for the hybrid-electric car company which said in January it was replacing battery packs on its $103,000 Karma model because it had discovered a hose clamp that might cause a fire if incorrectly installed.
Fisker’s attempt to snuff out concerns about the Karma battery follows three widely publicized fires or near-fires during testing in the battery of GM’s flagship hybrid-electric Chevy Volt. Both cars use lithium ion batteries although they are made by different manufacturers.
Project Nina was due to begin producing prototypes late this year and to begin selling to the public in mid-2013. The original schedule planned on full production by 2014, creating about 1,500 jobs. The car is projected to cost $50,000-$60,000.
Ornisher declined to say how long talks with the DOE might last, or what the company statement meant by “temporarily”, saying only that the DOE loan program has strict requirements. “It’s a very rigorous process of due diligence,” he said.
The negotiations are about setting new standards for the company to meet, and do not cover the amount of the loan or its repayment terms, Ornisher said.
He insisted the company still plans to go ahead with Project Nina, and that it’s just a matter of when, not if, the project becomes a reality. He said Fisker hopes to rehire the workers it has laid off.
“A flex model of expanding and contracting staffing for development of new cars is routine in the automotive industry,” the company statement said. “Project Nina is already well-advanced. Much of the engineering, design and development is near complete and we expect to ramp up operations again quickly.”
Meanwhile, the company is also seeking additional private funding to add to the $850 million in private equity it has raised so far, and may end up with a combination of private and public money. “We are looking at alternative sources as well,” Ornisher said.
Of the agreed $529 million DOE loan, Fisker has received $193 million, mostly for the Karma program.
According to Alan Levin, Director of the Delaware Economic Development Office, Fisker and the DOE have in fact agreed new terms and are now waiting to finalize a pact.
“My understanding is that they have come to terms on those new milestones,” Levin told DFM News. “It’s just getting it final.” He said he did not know what the new standards might be.
Levin denied the DOE had been overzealous in its scrutiny of Fisker’s start up operation but said that having agreed the loan, the agency should have kept the money coming. “I believe that having made the commitment, the DOE should have paid the funds,” he said.
Levin acknowledged Fisker had been about a year behind its production targets but always had been transparent with the government.
Despite the fresh uncertainties, Levin expressed confidence that the Nina will be produced in Wilmington, albeit later than expected.
Brian Selander, a spokesman for Gov. Jack Markell said in an email: “We are frustrated that Fisker and the Department of Energy have been unable to come to terms on revisions to their loan agreement in time to avoid this. We do remain hopeful they will double their efforts to get people back to work at the Boxwood facility as soon as possible.”
