Traditional automakers control their factories, and then quickly offload product to dealers who then manage the sale to buyers. Fisker, in contrast, didn't have control of production, and once it received the vehicles was left with the burden of carrying unsold product on its balance sheet.
In some cases, Fisker had started to take payment from customers while the vehicles were still at sea, according to the current and former employees. That angered customers, some of whom waited so long to get their car, they were making monthly payments on vehicles that had yet to arrive, they added. The company soon halted the practice.
Accounting holes
Fisker failed to file its quarterly financial report with the Securities and Exchange Commission in November 2023, after losing two chief accounting officers in less than a month.
Fisker's accounting team quickly became overwhelmed as soon as the company started selling vehicles, because the team was understaffed and lacked experienced personnel. When Fisker filed its financial report, the company said it hadn't designed a system to ensure that information was shared with the accounting department in a timely fashion.
Sales were also slow to materialize, in part because prospective buyers were canceling orders.
In a push to jump-start interest, Fisker in January tapped recruiters from its human resources department -- employees who normally found job candidates -- and dispatched them to restaurant parking lots and malls to offer test drives.
Fisker also did a U-turn on its direct-sales model, saying it was proving to be too time-consuming and expensive. Instead, the company would sell through traditional dealerships. The company said it signed up four retailers in February and had interest from dozens of others.
But by the end of 2023, Fisker had managed to deliver only about 4,900 of the more than 10,000 Oceans made by Magna Steyr to customers.
Fisker and Magna Steyr were also in a dispute over unpaid production invoices totaling about $8 million, according to a copy of a letter viewed by The Wall Street Journal.
Magna Steyr and Fisker declined to comment about the issue.
In March, Fisker missed a deadline to file its annual financial report with regulators, after auditors identified new "material weaknesses" related to its revenue and balance sheet calculations. The company also warned it risked running out of cash by the end of the year.
At the time, the company said it was looking for a financial savior and said it was in talks with a "large automaker" for a potential investment. But in late March, the company said the talks had failed.
Fisker's shares plummeted to around 9 cents after the news, leading to the delisting of the stock from the NYSE. The removal triggered a default on a convertible debt agreement with an investor, meaning that it owes the lender around $180 million -- more than it currently has in the bank.
At its Manhattan Beach headquarters, employees were told the company was moving to a new office and some of them had their desks and other office furniture removed during the workday. They resurfaced in less fancy La Palma on the outskirts of Anaheim.
In a last-ditch effort to boost sales, Fisker slashed the price of the Ocean by as much as $24,000 on some versions, but by mid-April its cash reserves had dwindled to $50 million, according to the company.
Two contractors, an engineering firm that was hired to work on a new pickup truck and a textiles supplier, that month sued Fisker alleging it hadn't paid invoices, totaling $7 million and $1 million, respectively.
Fisker said the lawsuit by the engineering firm was without merit, but declined to comment on the other supplier matter.
Write to Sean McLain at sean.mclain@wsj.com
(END) Dow Jones Newswires
May 14, 2024 00:01 ET (04:01 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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