When the Fisker Karma celebrated its first anniversary of deliveries to the US, we hope the revelers had the stomach to keep the cake down. After all, the 20.1 kWh 2.0-liter, 4-cylinder gas engine plug-in hybrid electric vehicle (PHEV), and by extension Fisker Automotive itself, has been on one heck of a year-long roller coaster ride.
Right off the bat, the pop culture elite embraced the ultra-hip Karma. Leonardo DiCaprio jumped the line to claim the very first Karma last August, and Justin Bieber’s custom chrome-finish Karma elicited as many jeers as cheers. Of course, the ultra-straight-laced conservative media predictably pounced on every Karma mishap as a politically motivated opportunity to bash the DOE’s emerging-energy loans as a failure.
But now, with the Karma’s second winter closing in, Fisker feels pretty confident that the real stars will align to light the company’s way to success with its Gen 2 vehicle, the Atlantic.
A year in the life
It all started out so smoothly in October 2011, as the Karma received Environmental Protection Agency (EPA) certification of 52 MPGe (miles per gallon equivalent) fuel economy and an all-electric range of 32 miles. By the start of December 2011, the Karma – universally revered for its chic styling – received the Luxury Car of the Year award from Britain’s BBC Top Gear magazine, in addition to a Car of the Year nod from Top Gear’s TV co-host James May. That unprecedented recognition marked the first time an American car scored the coveted Luxury Car distinction from Top Gear.
If karma is some kind of cosmic force of cause and effect based on deeds, then the Karma may have begun the payback for its delay to market of more than a year when problems with the A123-made battery packs surfaced on December 16, 2011. In early November, 2011, A123 had to lower its revenue estimates by $45 million due to a steep drop in expected battery orders from Fisker. However, any sympathy for the American battery start-up evaporated when a coolant leak problem in the A123 battery packs inside the Karma was found to pose a risk of fire. That initiated the first of several recalls that have plagued the Karma.
Fisker did the right thing in recalling all 239 Karmas (of which only about 50 were in customers’ possession) and replacing the battery pack in only two weeks, fortunately before any fires broke out. For A123, however, it was the first of a series of financial hits from which it may ultimately not recover. And in mid-January, just a couple of weeks after fixing the recalled batteries, Fisker again recalled all of the sold Karmas to fix a few minor software glitches, from random check-engine lights to faulty infotainment systems.
After the chipper announcement of the Karma’s expansion into Canada at the start of February 2012, the warm fuzzies didn’t last for too long. On February 6, word came down that although most of the design and engineering work for Fisker’s second production vehicle, the four-door PHEV sedan then called Project Nina, had been finished, the company was temporarily suspending the project and laying off 66 workers “until financing, either from the DOE or elsewhere, can be secured,” according to a company statement. It was a head-scratching move, since the DOE had already pledged $529 million to Fisker, but the carmaker had only drawn $193 million of it to that point. The rest of the money was to be for bringing Project Nina to completion, but the suspension of the project effectively froze the DOE loan.
Then at the end of February, Fisker replaced co-founder Henrik Fisker with industry veteran Tom LaSorda as CEO. LaSorda came from 30 years of service, including stints at GM and as CEO of Chrysler. Pundits speculated that the move may have been made to strengthen the chances for a merger, and LaSorda did state that “we will be seeking strong partnerships and alliances as Fisker continues to grow.”
Meanwhile, in battery land, A123 again had to recall battery packs in late March because they may have contained defective prismatic cells. Fisker was the largest customer of A123’s prismatic cell batteries, but the recall probably dealt a much heavier blow to A123, which stood to lose as much as $55 million in the process. Its stock (NASDAQ: AONE) fell by about 13 percent that day, and that proved to be only the beginning of the end for A123.
However, it proved to be full speed ahead for Fisker. Less than two months after the suspension of Project Nina, Fisker unveiled a prototype of the project’s end result, dubbed the Atlantic. The gorgeous “luxury four-door sporting sedan” cops a similar look and feel to the Karma, although it is smaller and has a target price of $55,000, compared to the $102,000 base price of the Karma. Besides wowing the New York Auto Show attendees with the stunning looks of the Atlantic, including the “grinning shark” front grille, Fisker also announced a private round of $392 million in financing, which would assure the completion of the Atlantic at a former GM plant in Wilmington, Delaware.
Also in April, Fisker announced a deal with Middle Eastern automotive distributor the Al-Futtaim Group, which will bring Fisker vehicles to key markets in the Middle East and North Africa, such as the United Arab Emirates, Saudi Arabia, Bahrain, Egypt, and others.
One of the strangest loops thrown into the Karma’s roller coaster year occurred in Sugarland, Texas on May 3. What’s known for sure is that a fire broke out in a man’s garage that destroyed several luxury vehicles, including a Fisker Karma. Local authorities initially blamed the Karma for the fire, but Fisker fired back, noting that the Karma’s Li-ion battery pack remained intact despite the inferno. Fisker went so far as to suggest that chicanery was afoot and that the fire may have been set deliberately. Later in the month, the National Highway Traffic and Safety Administration (NHTSA) stepped in to investigate, but has yet to release any conclusive ruling on the fire. In working with the NHTSA, Fisker spokesman Roger Ormisher confirmed to several media outlets in late May that the Karma involved in the incident had a fully intact and working Li-ion battery even after the blaze.
To close out the odd month of May, Fisker released a “Business Update,” a digest of positive indicators for the company, including the reporting of more than $100 million in revenue through April 30, 2012. That income came from the delivery of 1,000 vehicles to US and European customers. What strikes us as peculiar, though, is that that same quote of “more than $100 million in revenue from Karma sales” was also issued many weeks earlier in a February 16 press release.
In mid-August, the fire gods once again rained down punishment onto Fisker, when a Karma parked on the street in Woodside, California, ignited.
Engineers traced the blaze to a cooling fan that had an internal fault, and that led to a 2,400-car recall to replace the fan and install an additional fuse for added protection. However, in keeping with Fisker’s back-and-forth year, the silver lining appeared when Rudy Burger, the owner of the burned Karma and an investment banker, praised the car and said he planned to invest in the company. His wife Wendy Burger mentioned that they noticed the Karma’s fan running for long periods after plugging it in, but never thought to call the company about it.
Just days after the Woodside fire, Fisker pulled another CEO switcheroo, this time handing the reins over to Tony Posawatz, who had recently retired from GM after 32 years, including four years in executive positions on the Chevy Volt development team. That change occurred less than six months after LaSorda took the CEO job.
Posawatz bravely stepped into a firestorm of negative publicity following the Woodside Karma fire and resulting recall. Speaking to Charged in October, Posawatz talked about handling the recall in relatively short order. He also downplayed the recall as “small compared to other recalls that involve thermal events.”
Perhaps it was small numerically, but the 2,400 Karmas recalled represent close to or fully 100 percent of the Karmas available. “We have all the parts we need to replace the vehicles,” Posawatz says. “We completed that in a very quick manner, and it really doesn’t have – I don’t think – any impact on the mission of the product. It probably was publicized a bit more than it should be, if you look at the headlines on a daily basis.”
It would be naive to think that the CEO position of a start-up automotive company would be anything but challenging. Still, it would seem that Posawatz took over at a particularly inopportune moment, when an unfortunate recall piled onto the heap of concerns over producing the Atlantic, securing more funding, expanding into new markets and forging new strategic partnerships.
So far, Posawatz seems to be handling it with aplomb and with an eye toward a bright future. “Our new tag line is ‘onward,’” he says.
And move on Fisker has. A month after Posawatz joined up, Fisker announced plans to launch the Karma in China by November, with new hire Joe Chao as Executive VP and CEO of China and Asia operations. Henrik Fisker called the Karma “the first super car, if you want, that’s going to enter China with this type of drivetrain.”
By the end of September, Fisker had also completed another round of equity financing. “That’s now over $110 million that we can report on,” Posawatz says, “with another closing to be taken care of in the future with some new investors. We were very encouraged about this last round, which was a very quick round to help provide some reinforcements and some stability.”
Raising cash wasn’t exactly part of Posawatz’s agenda at GM. “I have found out, having come from a very big company, that funding for early-stage companies is always on the to-do list for the CEO,” he says. “It’s going to be an ongoing process. Everyone knows that the world of automotive is very, very, capital-intensive, but it really has taken us out of the realm of being a start-up. We’re selling cars. We’ve got an award-winning car that customers like, and now we’re trying to work towards a bridge to our next car or cars. Once you establish a new platform like Atlantic, there’s tremendous opportunities for derivative products as well.”
Some such derivative products may even come bearing a different brand name, as Fisker has thrown its arms wide open toward strategic partnerships with other car companies to share parts and technology.
One such partnership exists with BMW, which will supply a 3 Series 4-cylinder turbo engine for the Atlantic. In time for the SEMA show in Las Vegas, Fisker also announced aftermarket partnerships with 3M to develop and supply Fisker Diamond Protection Film, a durable paint-protection film that helps prevent damage from road debris, and Goodrich Technology will provide its environmentally-conscious PermaStar chroming process to give Fisker customers different wheel-finish options.
Posawatz was keeping quiet for now, however, about any other partnerships in the works, saying “that’s something I’d be happy to comment on at a future date.”
That date may arrive in December, when Fisker has promised to reveal a significant timetable for the production of the Atlantic at its former GM factory in Wilmington. When we tried to get Tony to spill the beans on the number of jobs that factory might provide, he stayed steadfast. “It’s a little premature to give you numbers and configurations and things like that,” he says, “but we’re just punctuating that it’s an important part of our strategy to utilize the Delaware facility as we make the next moves on Atlantic. Atlantic is a very important product for us.”
Parallels and perpendiculars
Naturally, Fisker’s second-gen product, the one that is supposed to establish the company in the mid-luxury market, ramp up their production runs by several-fold, and in the best case take the company into profitability, would be extremely important. To do it, Fisker will be reviving a major manufacturer’s former auto plant and attempting to take production from a couple thousand luxury sports cars to about 15,000 annual units of a $55,000 luxury sedan.
Gee, that sounds familiar.
Comparisons with Tesla Motors are unavoidable for the similarities: two American start-up companies entering the plug-in market, first with a luxury sports car and then with a lower priced but still high-end sedan. (Henrik Fisker worked for Tesla briefly on designing an EV sedan before Elon Musk summarily dismissed him, and Tesla later sued Fisker for stealing trade secrets. A California court, however, called the charge “baseless” and awarded Fisker $1 million in remuneration.)
Of course, the glaring difference between the two start-ups is the technology they’ve chosen to embrace: pure EVs in the case of Tesla and PHEVs for Fisker. This difference is a big deal to Posawatz, who has nothing bad to say about Tesla.
“I actually don’t view them as a competitor in a product sense,” Posawatz says. “Basically, I root for them, because as many people know in this business, I root for plug-in cars. I think offering the customer lots of choices is a good thing. Now, that being said, I like the choice that Fisker has.”
Posawatz thinks that PHEVs are what more drivers want right now, because they take care of range anxiety. “Many people debate whether that’s a true malady or not,” he says. “I submit to folks that it’s real. Just take a look at sales of these alleged 100-mile battery electric vehicles. The Fisker Karma also avoids charging anxiety. Let’s say you have a vehicle with a little bit more range. Well, the further you go from home, the longer it will take you to charge. These are things that we have studied deeply. This is why we like our solution for extended range onboard the car using the 150,000 gas stations in the United States, not having to wait for some newer exotic infrastructure to pop up. People are very comfortable with an extended-range electric vehicle, because it does not compromise their lifestyle.”
Whether it happens sooner or later, it certainly appears that at some point an EV will be able to drive all day without stopping and charge completely overnight, effectively eliminating the concerns of range and charging anxiety for all but the tiniest minority of hard-driving and probably dangerously sleep-deprived individuals. We asked Posawatz when he thinks that day might come.
“I don’t do forecasting,” Posawatz says. “Instead of predicting the future, I just try to create it. From an infrastructure perspective, there’s been attempts made in the late 90s when EVs were around to do infrastructure. I’m not sure much of that infrastructure is even left. There’s been discussions in California about the Hydrogen Superhighway. I’m still waiting for that. The natural gas proponents will tell you that that’s a wonderful thing, too; I’m still waiting for those gas stations. Anytime someone gives me ‘the infrastructure will solve the problem,’ I look at some history. Did you know that it took 50 years for just half of the US households to get electricity? I don’t think there’s anyone who would argue that electricity in the home is a good idea. So given those facts, we know this takes time. Our proposition to customers is powerful: The car of tomorrow, you can drive today.”
Tony’s last word on Tesla simply has to do with product strategy. “The Roadster doesn’t even exist anymore,” he says. “We intend to carry forward with the Karma. We have nice upgrade plans to keep it special. The Karma will always remain an iconic car for us.”
Don’t you forget about me
Despite the intermittent problems the Karma has had with its battery, software, and fan, and some of its struggles in the press, such as the failing grade it received from Consumer Reports, Posawatz points to what he believes matters more: customer satisfaction, sales numbers, and the Karma’s many awards.
On top of the aforementioned Top Gear distinctions, in October the Karma garnered four more titles for its résumé. It beat out the Boeing 787, Faraday Bike and Ford Fusion to win Fast Company’s Innovation by Design award in the Transportation Category. Two similar distinctions came to the Karma in the form of the German magazine Auto Bild’s Golden Steering Wheel Award for Classic Car of the Future (limousine category) and Motor Trend’s Top 10 Future Classics of 2012. Finally, the Swedish magazine Audio Motor Und Sport named the Karma Environmental Car of the Year for 2012. All those awards complement the Karma’s status as one of Time’s Top 50 Inventions of the Year and Automobile’s Design of the Year award.
Posawatz recognizes that with a six-figure price tag, the Karma doesn’t attract anything close to the average car buyer, but he’s still extremely proud of the car’s overall customer satisfaction. According to him, “our clientele, many of them have four-plus cars in their fleet, but close to two thirds of these owners of Fisker Karmas drive the car as their primary car. Boy, that to me is a telling point. I’ve got friends who have Ferraris that drive them once a month on a weekend. And here you have a car that’s a little bit more of an exotic, super-car type… and two thirds of the owners are driving them as their regular car. It gives them what we call at Fisker ‘the Power of And.’ It gives them the luxury, and the performance, and the styling, and the fuel economy. And having two power sources is really a liberating technology for folks. They’re driving it all the time because they love the driving experience.”
Analyzing the Karma’s sales figures can be tricky, since the company doesn’t release monthly sales stats. Still, Posawatz very proudly claims the Karma as the fourth-best-selling plug-in vehicle out of the dozen models available in the US. In September, Fisker reported delivering 1,500 Karmas since December 2011 to the US and Europe. If you look at the total units sold in 2012 through September for the Volt (16,348), Prius Plug-in (7,734), and LEAF (5,212), the Karma’s fourth-place status looks plausible.
Posawatz takes those cumulative sales numbers as further proof that Fisker has made the right decision in backing PHEV technology, as the LEAF is the only pure EV of the four top sellers. He takes pride in the Volt’s success as well. “If you look at Volt sales over the last year compared to Prius,” he says, “it’s much faster than Prius was in its first four or five years, and then look at Prius today.”
He also feels a similar experience happening at Fisker as when he was working on the Volt. “Working in an environment that is a start-up and maturing into a real car company is really the same experience I had with Volt, so I do believe that there are lessons learned that I can apply to Fisker. And Fisker just has so much goodness embedded in it. A company that has great styling, product focus, and technology sounds like a formula that companies employ in other industries to win.”
Posawatz believes the experience that both Fisker and the Volt team are gaining with PHEV technology will place them ahead of the curve and make them extremely attractive to potential strategic partners.
“If all the OEMs have to meet fuel economy requirements in the future,” Posawatz says, “and Fisker, that small company in California, is only one of two companies that has a Gen 1 [extended range EV] on the road today and is working already on their Gen 2 technology? That sounds pretty interesting to me.”
He plans to use that reasoning along with hard data to make Fisker’s case to partners. For example, he points out that the Karma already meets the CAFE standards for 2025 today. For a vehicle of Karma’s size, the 2025 standard calls for 45.6 MPG, and according to current NHTSA testing (which is different from the EPA’s methods), the Karma gets 47.3 MPGe.
“This allows us the opportunity to have discussions with many different stakeholders or potential partners,” Posawatz says. If you know that by Gen 2 it’ll be a true enabler for fuel economy improvements and uses the best of both worlds – electric when you want it and gas when you need it – I think it’s exciting and bodes well.”
What goes around
Fisker’s 2012 began with damage control stemming from a Karma recall due to A123’s battery packs. By mid-October, A123’s various setbacks and a failed bid for the Chinese auto parts giant The Wanxiang Group to save the company culminated in A123’s filing for Chapter 11 bankruptcy and an agreement to sell off its automotive assets to Johnson Controls. Karmic retribution? Maybe. Or maybe it’s a symbolic closing of the book on all of the Karma’s struggles.
With December closing in, Posawatz reaffirms that Fisker is on track to deliver its timetable for Atlantic production out of Delaware and to reveal other news as well in what sounds like a possibly monumental announcement from a company looking to take itself to the next level.
“We will be reinforcing the ranks here,” Posawatz says. “We have some key decisions we’re going to make internally with our board of directors.
We have new management – a bunch of new senior leaders with a lot of great auto experience. You’ll see the Fisker team coming out, telling its story with a lot of credibility and a lot of passion, but telling it when we can absolutely demonstrate it and back it up.”
While Posawatz admits that Fisker has taken some “missteps” like any start-up, he’s ready to move on to what he sees as a very positive upside to a company with 98 percent of its employees located in the United States, and what he claims is a very high close rate at dealerships for the Karma. “Once we get them in, and they see the car and test drive the car, it speaks for itself. I personally just love driving the car, and I’m kind of a car nut – a ‘car guy’ as Bob Lutz would say.”
Yes, it’s been a whirlwind 10-week tenure for the new CEO. Much has been demanded of him. He’s already faced PR nightmares, company-saving fundraising, international expansion, team building, and the need to plan out the company’s entire future and path toward profitability. Is there anything he wants in return? “As long as the car is on the cover [of Charged],” he says, “I’ll be happy!”
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