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USA: Battery-maker’s collapse leads to massive delays for electric car company

The collapse of a government-subsidized battery manufacturer has caused the production of a government-subsidized electric car company to halt, raising questions about the government’s decision to support the two companies.

Fisker Automotive makes an extended-range electric luxury car called the Karma. It received approval for a government loan totaling $529 million in 2010.

The Karma uses a battery pack made by A123, which received a grant from the Department of Energy in 2009. A123 filed for bankruptcy in October, leaving Fisker, at least temporarily, without a battery manufacturer.

Fisker has suspended production of the Karma until A123’s sale is complete.

Meanwhile, documents obtained by the Free Beacon indicate Fisker has its own financial issues.

A credit report prepared by the Department of Energy and dated Dec. 12, 2011, listed the “recovery rate” at 50 percent, indicating the government did not anticipate recovering the entirety of its loan to Fisker. The credit report also noted Fisker’s weakening credit rating, which declined from CCC+ to CCC due to its “deteriorating financial profile and/or persistent operational inefficiencies.”

The report notes that Fisker failed to meet previously agreed-to milestones, causing the government to suspend the remainder of Fisker’s loan. Fisker had received $193 million from the government by this point, according to Fisker spokesman Roger Ormisher, and has not received the remainder of the loan total since.

But the Department of Energy had reason to worry even before then. An internal email dated Feb. 26, 2010—almost two months before the department announced Fisker’s finalized loan—says Fisker was “undercollateralized.”

Another email dated Aug. 23, 2009, shows just how desperate Fisker was for the loan from the Department of Energy.

“We need the approval for Karma or for Karma and Kx in a very short timeframe. A delay until the end of September is not possible for us or our suppliers,” wrote Fisker chief operating officer Bernhard Koehler, who also noted that he was laying off people from the company.

“This is hurting me a lot (personally and business related),” he wrote, “and is giving our competition (Tesla included) a huge advantage.”

A123 added to Fisker’s woes when it recalled many of their batteries, including the ones manufactured for the Karma. Consumer Reports gave the Karma a failing grade in September, in part because of the car’s battery troubles.

The recall cost A123 $50 million, according to the Christian Science Monitor, and contributed to its bankruptcy.
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