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Fisker Woes Grow on Staff Furloughs, Dongfeng’s Retreat

Fisker Automotive Inc., a maker of luxury plug-in cars that’s seeking investors to fund operations, lost a potential automotive partner and furloughed employees for a week to save cash. Fisker also retained restructuring lawyers, according to a person familiar with the matter.

Dongfeng Motor Group Co. (489), a Chinese carmaker that had considered buying a stake in Anaheim, California-based Fisker, said yesterday those discussions are over. Fisker has repeatedly declined to identify specific companies it’s talking to.

Xu Ping, Dongfeng’s chairman, told reporters in Hong Kong that acquisition talks ended as there was “some distance” between Fisker’s future development and the Wuhan, China-based automaker’s plans. Dongfeng had offered $350 million for majority control of Fisker, people with knowledge of the matter said last month. Neither company confirmed that bid.

Fisker has struggled since halting assembly of rechargeable Karma sedans last year when the supplier of the $103,000 car’s lithium-ion batteries, A123 Systems Inc. (AONEQ), filed for bankruptcy. Henrik Fisker, the auto designer who co-founded the company, quit this month over unspecified disagreements with other executives.

The closely held carmaker retained restructuring lawyers from Kirkland & Ellis LLP, said a person familiar with the matter who declined to be identified because the move isn’t public. The law firm’s corporate bankruptcy and restructuring practice is one of the biggest in the U.S.

Roger Ormisher, a Fisker spokesman, declined to comment. Kirkland’s role was reported yesterday by the Wall Street Journal.
Venture Capital

Fisker Automotive, with celebrity customers including singer Justin Bieber and actor Leonardo DiCaprio, has sold about 2,500 Karmas in the past two years. It has raised more than $1 billion from private sources, including Silicon Valley investor Kleiner Perkins Caufield & Byers, and was awarded $529 million in low-interest federal loans in 2009 to develop and build its plug-in hybrid cars.

That hasn’t been enough to sustain operations after a slower-than-expected startup, technical flaws that led to two Karma recalls and the A123 bankruptcy. Fisker said last year that the Energy Department blocked access to the loan after the carmaker failed to meet an initial timetable for Karma deliveries.
Temporary Furloughs

“In parallel with the process of identifying a strategic partner, Fisker is, of course, continuing to manage its day-to- day operations and has recently instituted temporary furloughs for its U.S. workforce covering the final week of March,” the company said this week in an e-mailed statement.

More than 200 employees are affected by the action, Ormisher said.

“Cash is the bugaboo for startup car companies — it always has been,” said Jim Hall, principal of consulting firm 2953 Analytics in Birmingham, Michigan. “Undercapitalized car companies aren’t car companies for long.”

Fisker’s Karma goes as far as 40 miles (64 kilometers) on electricity before a gasoline engine kicks in. The company’s U.S. loans came from the Advanced Technology Vehicle Manufacturing program created under President George W. Bush to help automakers build more fuel-efficient cars and trucks.

Loans were awarded in 2009 to Ford Motor Co. (F), Nissan Motor Co. (7201), Tesla Motors Inc. (TSLA) and Fisker for the companies make battery-electric and plug-in hybrid vehicles, part of an initiative by President Barack Obama to get a million rechargeable autos on U.S. roads by 2015.


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