All posts tagged 'electric car'

Bad Karma for Fisker Automotive: Of Loans and Lawsuits

February 21, 2012 22:59
by J. Wylie Donald

As if it wasn’t hard enough trying to displace the internal combustion engine as the motive force of the automobile, then this happens.  First the plug-in hybrid Chevy Volt’s battery starts catching fire.  Then battery-maker Ener1 files for bankruptcy protection.  Last Thursday, the electric vehicle arena acknowledged more bad news.  Fisker Automotive, maker of the electric sport coupe Karma and promisor of the Nina, issued a press release following a set of disquieting reports from various outlets.  The sour news:  “As a prudent business measure, project Nina has been temporarily put on hold until financing, either from the DOE or elsewhere, can be secured.”

Fisker is the high end of electric vehicles.  Its “plug-in extended range” Karma sedan seats four and retails between $96,000 and $109,000.  It can do 0-60 in 7.9 seconds in full electric (Stealth) mode (the plug-in part).  But turn on its gasoline engine, which turns its electric generator, and you’re down to 5.9 seconds (Sport Mode) (the extended range part).  Motor Trend calls it “a sweetheart to hustle.”

Nina is (was?) the more consumer-friendly version of a Fisker. It is to be (according to reports) a compact or midsize sedan, priced in the $40,000 range (after the $7,500 federal tax credit).  It is to be built in a refurbished GM plant in Delaware, which Fisker bought out of GM’s bankruptcy in 2009.  Predicted production levels were 100,000 vehicles per year.  That goal is currently not realizable.

Fisker has raised a lot of money.  Besides over $850 million in private financing, in 2009 “Fisker Automotive closed a $529 million loan arrangement under the Department of Energy’s Advanced Technology Vehicles Manufacturing Loan Program for the development and production of two lines of plug-in hybrid electric vehicles. The project is expected to create about 2,000  jobs in Wilmington, Delaware.”   Times change.  In May, after providing $193 million to Fisker, DOE stopped lending because various milestones in Karma sales and production had been missed.  Or as Fisker put it in its recent press release:  “In May 2011 Fisker Automotive opted to stop taking reimbursements from the DOE while the company entered negotiations to implement more realistic and achievable milestones.”

Fisker's financial difficulties are not being kept secret.  The tip of the proverbial litigation iceberg made its appearance earlier this month in the form of a lawsuit filed in California Superior Court: Wray v. Fisker Automotive Holdings et al. (Complaint attached below.)  In the suit Mr. Wray, an investor in Fisker and various Fisker investment entities, claims he was deceived into buying Fisker securities because he was unaware that a subsequent "pay to play" offering could require him to increase his investment or lose the beneficial position he had procured by virtue of his earlier contributions.

Mr. Wray put over $200,000 into Fisker. In return he received preferred stock with various benefits such as "conversion price discounts", "anti-dilution protection", and "liquidation preferences." While risks of investing were disclosed, nowhere, it is alleged,

did the offering memoranda inform Daniel Wray, or any other investor, that if he did not participate in future forced financing of Fisker, as Fisker and Advanced Equities [the broker/dealer] dictated, he would suffer a significant dilution of all of his earlier investments; conversion of the convertible preferred stock to common stock loss of all the rights, preferences and privileges that his ownership of preferred stock conferred, including liquidation preference, anti-dilution protection and initial public offering discounts/special conversion rights. Complaint ¶ 26.

But on January 18, 2012 the broker/dealer wrote Mr. Wray (and presumably others) seeking money: "Due to Fisker's urgent need for equity capital, the Financing now contains a "pay to play" provision that requires all holders [of certain securities] to purchase Series D-1 Preferred Stock in an amount equal to at least 40% of such holder's aggregate dollar amount invested ...".  Id. ¶ 28.  Mr. Wray had slightly over $200,000 invested, and was now on the hook for another $83,922.32. In his complaint, Mr. Wray alleges breach of fiduciary duty, fraud, negligent misrepresentation, and various violations of the California Corporations and Business & Professions Codes, among other things.

The greencarreports blog did a little investigating and is not overly sanguine about Mr. Wray’s chances on the merits.  We look at it from a different perspective.  We are not privy to Mr. Wray's thinking but his suit may be an astute way to buy time before committing to the next $80,000. If the DOE funding hurdles are cleared, or private sources come through, then the investment, particularly for one in preferred status, may be particularly fruitful. And if the big money is not forthcoming, then throwing good money after bad might be avoided.  In that case, Mr. Wray might not find himself alone on the tip of the iceberg any longer either.

20120207 Complaint, Wray v. Fisker Automotive Holdings, Inc..pdf (707.64 kb)

Climate Change | Green Marketing | Solar Energy

Plugging in Electric Vehicles May Raise IQs

November 12, 2011 00:22
by J. Wylie Donald

It's not Gone with the Wind or Harry Potter, but an article just published in the public health journal, Health Affairs, is worth picking up, if only to start you thinking.  In Six Climate Change–Related Events In The United States Accounted For About $14 Billion In Lost Lives And Health Costs, the authors (two senior scientists at the NRDC, two professors and a law student) grapple with the health costs of climate-change related events.   In the authors' words:  "The objective of this study was to provide a cost calculation of health effects associated with events related to climate change over the past decade. Similar events can reasonably be expected to occur more frequently in the future." 

The report looked at six events (ozone pollution, heat waves, hurricanes, infectious disease outbreaks, river flooding, and wildfires) between 2000 and 2009 and estimated that the total health costs exceed $14 billion. It acknowledges that the individual events cannot be linked definitively to climate change and that the relationship between climate change and health is complex and variable.  The report's value, it is asserted, is that it provides information on "the types of health impacts that are projected to worsen under climate change."  Interestingly, it reports health linkages that are generally overlooked.  Increases in carbon monoxide poisoning are associated with hurricanes as a result of power outages and the use of generators.  Wildfires result in increases in asthma.

While the report is a good start, in our view it attempts too much.  We have no doubt that everyone will agree that hurricanes and wildfires cost money and threaten health.  But just providing a sample of one hurricane season in one locale and one state's experience with heat waves hardly advances the ball (particularly when it is acknowledged that the studied event was a "high-end, but not extreme, event").  Much more useful would be to explain the variables that affect those health expenditures in each of the subject areas.  Still, one has to start somewhere and other researchers can pick up where this leaves off.

The report acknowledges that it did not consider the health benefits of climate change.  We would like to point out one that may soon be more well-known:  the health benefits of the electric car.  And we are not talking about the benefits to your inner ear and auditory canal from the quiet.  Rather, the electric car may be the vehicle for making the nation smarter.  

Many years ago engineers figured out that bonding a few organic molecules to a lead atom and adding it to gasoline could eliminate "knocking" in a car's engine. A billion dollar industry was born. Unfortunately, after the anti-knocking job was done, the lead continued on out the exhaust pipe and ended up on the side of the road. That was the end of it until public health specialists drew the connection between retarded cognitive development and other maladies and the use of leaded gas. It took the USEPA only 15 years (including an appeal to the D.C. Circuit) to achieve a total ban on lead in motor vehicle fuel in 1986.

Now we are twenty-five years later. Lead is long gone from automobile fuel but health researchers are again focusing on the connections between retarded cognitive development and a host of other maladies and automobile exhaust.  This story is set forth this past Monday in a Wall Street Journal article, The Hidden Toll of Traffic Jams, by Robert Lee Hotz.  Mr. Hotz surveys the scientific literature from across the country and around the globe and points out the correlations scientists are finding between high levels of exhaust and lower IQs, anxiety, memory loss, attention deficits, and premature births.  This time the culprit cannot be lead. In fact, no one knows the identity of the specific etiologic agents.  But even without that information, one solution would be to knock down exhaust levels across the board. Enter climate change. Or more specifically, enter a response to climate change:  the electric car.   It is touted (somewhat misleadingly) as a zero emission vehicle. It has no tail pipe. Even when its emissions are acknowledged (those that go up the power plant stack), however, power plants are far more efficient and much cleaner than internal combustion engines. Hence there are far fewer emissions per mile traveled and the maladies correlated to exhaust invariably will decrease.

Will this health benefit drive the adoption of electric cars? Certainly not by itself. Will it be a factor?  Only time will tell, but if leaded gas is any indicator, we will soon see health advocates pushing for charging stations and plug-n vehicles, and some of us will be smarter for it.

Climate Change Effects | Sustainability


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