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Bad Karma as Fisker sacks majority of workforce

Nice knowing you: Fisker Automotive’s headquarters at Anaheim in California has seen happier times.

Cash-strapped Fisker Automotive in hot water for slashing workforce without notice

Fisker logo8 Apr 2013

By HAITHAM RAZAGUI

TROUBLED luxury plug-in hybrid car-maker Fisker Automotive slashed its workforce by around 75 per cent on Friday, a move reported to be a desperate attempt to avoid bankruptcy.

Making matters worse, the Californian company was reportedly served with a federal lawsuit accusing it of violating federal and state Worker Adjustment and Retraining Notification (WARN) legislation by failing to provide affected employees with sufficient notice.

Fisker has delivered around 1800 Karma plug-in hybrid sedans, but has not produced a car since last July when its battery supplier, A123 Systems, went bankrupt.

A source familiar with Fisker’s finances told Reuters the company has “at least” $US30 million ($A28.9m) in cash plus $US15m from settling a claim with A123 Systems.

Reuters also reports that Fisker hired a law firm to advise on a possible bankruptcy filing while an investor is found.

Fisker has been searching for a partner or buyer to ensure its survival, with Volvo owner Zhejiang Geely and Dongfeng Motor reportedly among the potential Chinese suitors.

But neither have yet struck a deal and both were reportedly put off by the terms of Fisker’s loan agreement with the US Department of Energy (DOE), which in 2009 awarded the company a $US529m loan that was subsequently frozen, partly due to delays in launching the Karma.

The company also ran into problems when battery coolant was found to be leaking on Karmas built at the Valmet factory in Finland, where the cars were made under contract, resulting in the first 239 Karmas were recalled.

Further bad news came when a number of Karmas caught fire, prompting a recall to replace a potentially faulty cooling fan.

Last month co-founder Henrik Fisker unexpectedly resigned, citing “several major disagreements” with company management over business strategy.

In a statement issued on Friday, Fisker Automotive confirmed it had cut around 75 per cent of its workforce and said its “efforts to secure a strategic alliance or partnership are continuing in earnest”.

“Unfortunately we have reached a point where a significant reduction in our workforce has become necessary.

“The company regrets having to terminate any of its hardworking and talented people. But this was a necessary strategic step in our efforts to maximize the value of Fisker's core assets.” Fisker is reportedly now is open to selling off company assets, including intellectual property rights to its plug-in hybrid technology.

According to Reuters 53 senior managers and executives were asked to remain with Fisker to keep seeking buyers for company assets, while attempting to negotiate with the DOE over a $US10m loan repayment due on April 22.

A Fisker employee told Reuters that around 160 employees received termination notices and were told the company could not afford to give them severance payments.

Under WARN legislation, a company is required to notify employees of their terminations at least 60 days in advance.

According to Automotive News the lawsuit filed against Fisker on behalf of former employees seeks class action status.

In addition to the alleged WARN legislation breach, the lawsuit says sacked Fisker employees missed out on wages and benefits they would have otherwise received during the 60-day notice period.

It also says Fisker failed to notify the Californian Employment Development department and relevant elected officials of the terminations.

According to Reuters, the law firm filing the suit, Outten & Golden, last year won a $US3.5m settlement in similar action against collapsed solar panel manufacturer Solyndra.

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