In spite of bids from Chinese automotive makers to purchase Fisker Automotive outright, a judge has ordered that the failed car company’s assets will be going to public auction. Judge Kevin Gross said that while the Department of Energy had already an auction of some of the company’s assets to repay its loan, Fisker was essentially in too deep to avoid another. In addition, Chinese automaker Wanxiang America Corporation suggested that the old General Motors plant in Newport, Delaware, would be a great location to start manufacturing hybrid vehicles again.
Anaheim-based Fisker Automotive had been plagued by vehicle fires, bankruptcy of its primary battery supplier and inventory losses as a result of Hurricane Sandy in 2012. The superstorm battered a New Jersey port, destroying several vehicles in the process. Fisker Automotive was known for manufacturing luxury hybrid vehicles such as the Karma, which had a retail price of $100,000.
Hybrid Technology LLC, one of Fisker Automotive’s creditors, had attempted to take control of the beleaguered company in a private sale, saying it was owed over $75 million. However, Judge Gross believed that all of Fisker Automotive’s creditors would benefit from a competitive auction and that Hybrid and Fisker were trying to push through the sale far too quickly. The judge’s decision clears the way for Wanxiang America Corporation to enter into the auction with a higher bid. During his decision, Judge Gross raked both Hybrid and Fisker over the coals, stating that with the emergence of other buyers such as the Wanxiang American Corporation, Fisker had a better chance of repaying all its creditors.
As the judge ordered Fisker Automotive’s assets to head to public auction, the curtain closed on the beleaguered company’s trip through bankruptcy, which began with a $529 million loan commitment from the Department of Energy. Fisker’s problems began shortly after it had secured the loan commitment, and the judge’s decision on Friday paved the way for a competitive auction from those interested in purchasing what assets it could from the troubled company.
Hybrid Technology LLC had hoped to take over Fisker Automotive, particularly since it had already purchased the $168 million Department of Energy loan Fisker held for $25 million. The offer on the table from Hybrid essentially meant that Hybrid could purchase assets from Fisker for pennies on the dollar. Judge Gross deemed that the deal would be grossly unfair to several of Fisker’s creditors, including the state of Delaware.
Wanxiang came prepared to hear the judge’s ruling on Friday, having initially offered $37.5 million for the bankrupt Fisker as a starting point for the competitive auction. The money was contingent upon whether or not the Hybrid offer would be eliminated or capped. The move to purchase Fisker only makes sense according to many business specialists, particularly since Wanxiang had purchased the battery company that helped contribute to Fisker’s demise.
Hybrid spokesperson Caroline Langdale said the company was “deeply disappointed” in Judge Gross’ decision, but would abide by the court’s wishes and participate in the planned auction, as the company still feels it is the most viable option for Fisker’s future. Wanxiang declined comment on the judge’s decision.
The auction date will be discussed at a hearing Monday. The judge’s order to send Fisker Automotive’s assets to public auction will doubtless be executed in the weeks to come.
By Christina St-Jean
Minneapolis Star Tribune