The bruised staff at Fisker was in disarray as it readied the first batch of its electric cars for US customers.
But it had been four years since the celebrity car designer Henrik Fisker had announced his would-be Tesla killer-an SUV he called the Ocean-and the damn thing still wasn’t ready.
In the weeks leading up to the June concert of 2023, staff at Fisker raced to repair faulty parts on at least four of its 22 EVs set to be delivered — even pulling parts off the CEO and CFO’s cars to fix the vehicles, including door handles and seat sensors, according to 11 people familiar with the incident.
Five sources two days after the event told Reuters the Ocean SUV of Fisker board member Wendy Gruel – one of the event cars delivered – turned off while going full speed on a public road. Workers said the same thing happened to Geeta Gupta-Fisker, Henrik’s wife and the company’s CFO and COO.
A Fisker Inc. spokesman also denied employees had cannibalized parts from preproduction vehicles to use in customer cars and that Gruel’s car stopped in a private driveway, not on a public road. It said indeed that the vehicle driven by Gupta-Fisker had experienced a malfunction – but it had been fixed.
TechCrunch’s first post reporting on Gruel’s car said the company told them the story had been confirmed and corrected.
The problem wasn’t because of Fisker’s part swapping, but truth was already evident: the electric cars could hardly get on the road before the troubles began piling up. And for Henrik Fisker, it should have been a slam dunk. The 60-year-old automotive veteran has a storied career behind him, having designed the Aston Martin V8 and BMW Z8 roadster that famously appeared in a 1999 James Bond film and has helped design the Tesla Model S.
But still, even if it was Henrik’s second automotive startup after his first company went out of business in 2013, some workers said it was impossible to not worry at the beginning of his second company.
For his part, Henrik said he planned to do things differently this time.
He also would follow the Apple model in outsourcing production by using Magna International, and he planned to hit the middle of the market with an easier-on-the-pocketbook EV that stood up against Tesla’s best-seller, the Model Y. Fisker Inc. was started in 2016 and had gone public in 2020 through a SPAC financed by Apollo Global Management. At the time, the market’s estimation of the company reached up to $ billion. Back then, Fisker was one of several EV startups bursting onto the scene—Rivian, Lucid, and Lordstown all wanting their shot at Tesla. Since then, production and market headwinds have pushed some electric vehicle startups to shutter and major players such as Ford and GM to scale back their electric-vehicle operations—mileage that puts more context into that last sentence. Even Tesla has stumbled, curbing its revenue and laying off people.
“I was hopeful at first,” said a former veep, who worked at both Fisker startups. “At first, at least, it actually looked like he had learned from his mistakes. It quite apparently turned out later, that wasn’t the case.”
A Fisker official said it would be “unfair” to conduct a side-by-side comparison. Today, that company is struggling to stay afloat, pulling out all the stops in an effort to ward off bankruptcy. Business Insider interviewed more than two dozen current and former Fisker employees who have worked for the startup since its founded in 2016. All of them spoke on condition of anonymity since they are not allowed to talk for Fisker and said they feared professional retaliation.
A husband and wife duo who workers say mismanaged their way into a mess
Many of Fisker’s woes can be traced back to the husband-wife duo that launched the brand, multiple former and current workers told BI.
They described a disorganized environment in which unqualified people were brought in to lead major programs and basic automotive standards were ignored.
While Henrik often served as a figurehead, Gupta-Fisker was heavily involved in everyday decisions, including on the engineering side, 11 workers said. Prior to taking on the role of CFO and COO at Fisker, Gupta-Fisker had served as an investment manager for the Fisker family office and as an advisor at a nonprofit. She had no prior experience in the automotive industry. But at Fisker, the workers said she managed deals with Magna and outside parts suppliers, frequently popped into engineering meetings, and weighed in on everything from parts purchases to software decisions.
A spokesperson for Magna declined to comment on Fisker. A Fisker spokesperson denied comments that Henrik took on a more passive role and said he was “deeply involved.”
Gupta-Fisker, 49, was soon noted in the firm for its astute cost-cutting skills. Yet her approach came at some cost where, at times, Fisker used components not meeting proper specifications for the Ocean, five ex and current workers said. Against the advice of executives at Fisker and Magana, Gupta-Fisker took several decisions to use cheaper parts, two workers confirmed. The mismatches somehow cause over-the-air update problems, the five workers said.
The corporation said that, overall, Magna handled most of the parts sourcing, and a “substantial” amount of the parts originated from Magna and its suppliers.
In interviews, most BI staff blamed cost-cutting for many of the Ocean’s faults.
Some workers said that during the months before the vehicle was launched, internal reports recommended more testing and development of the product before launch. They said they were told the company would go ahead anyway.
“The focus was on getting the car to market as quickly as possible,” one former worker said. “The overall belief was we could always fix things with updates later.”
The Fisker spokesperson added, “Magna was responsible for testing and releasing the Ocean, and they were fully certified by regulators in the US and Europe.” The company claimed to have started sending out “over-the-air updates” in 2023. Five current and former workers and internal documents reviewed by Business Insider before the release say the Fisker engineers knew of many problems with the vehicle.
They had issues with the door handles, key fobs, and how the sensors of seats work – general fit and finish of the car. Over the last year, the National Highway Traffic Safety Administration has opened four investigations involving Fisker’s SUV, averaging from complaints of inadvertent braking to physical deficiencies in the vehicle’s door-latch system. The company said it is cooperating with NHTSA.
Cutting corners led to compounding issues
Seven current and former workers said that, in its rush to bring the car to market, Fisker failed to set up an effective system for processing repair orders and warranty claims. The technicians are supposed to fill out the work orders, and many said they had received no training in the procedure.
According to an internal document reviewed by BI, some workers took to processing the warranty claims—submitted sometimes with tens of thousands of dollars in parts and labor, according to the invitations to settle—without the proper California Bureau of Automotive Repair codes and EPA license numbers, using “123456” as a placeholder in numerous repairs. In March, a Fisker VP cautioned that not only did the problem put the company in violation of NHTSA protocols, but it was also unable to track and report safety concerns properly.
“A Fisker spokesman described it as ‘an internal error with only draft work orders early in the service process that was immediately corrected.’ “
The majority of repairs went unaccounted for without a system to process warranties or repair orders correctly, seven current and former workers said. That would mean Fisker didn’t have a proper way to track which parts were getting used for repair for its financial records. It also meant many customers ended up not getting a good record of their repairs, workers said.
Meanwhile, Fisker also struggled to get the parts it needed to do all of the fixes. The company had not stockpiled much inventory for replacement parts, so some of the parts used to fix customer cars came either directly off the factory line, meaning they were intended for vehicles Fisker built to sell, or the parts were stripped from pre-production and production vehicles, 11 workers with knowledge of the issue said.
In one case, three former workers said, Fisker simply pulled parts off an engineering test vehicle shipped from Magna’s facility in Graz, Austria, under an import bond. That vehicle was supposed to be destroyed in its entirety shortly after it was delivered to comply with the terms of the import. This is typically within a year, NHTSA said, but it can be lengthened in one-year increments up to 3 years. The components were not intended to be used for installation on customers’ vehicles.
It said no test vehicles had been used for parts, and all imported testing vehicles had been destroyed under supervision from NHTSA within the time permitted.
The spokesperson also challenged the claim that no after-sales parts were available for Fiskers: “The Service department made their forecast for parts, based on their sector knowledge. Purchasing supported those requests.”
Fisker employees also sought creative ways to get around the parts shortage. The company encouraged workers on trips to Graz to bring parts back in their suitcases, seven workers said, to skirt import fees. They included an employee who said he had to leave personal items behind so he had room for air vents and critical fobs and another who said he brought a much bigger bag to accommodate trim panels.
Fisker did not respond to questions regarding the allegations.
A sales scramble in the face of bad reviews and disappearing demand
Fisker did quite successfully generate interest initially with more than 65,000 reservations placed.
But in the year since the Ocean’s release, the company has delivered around 7,000 vehicles, a Fisker spokesperson said. Negative reviews, like YouTuber MKBHD calling it the”worst care I’ve ever reviewed” notwithstanding, it had the effect of apparently driving thousands of would-be customers to cancel their own reservations.
The previous month, six former workers said, Fisker had begun to bring in hiring recruiters to close sales, signing purchasers to buy a vehicle, and then to arrange delivery of the car after the sale had been processed. Many of the recruiters who were initially brought on to the human resources team had zero experience in automotive sales.
A Fisker spokesman said recruiting staffers that did accompany the sales efforts, though the company said they were asked to stay because they were successful in the new role.
Selling the car wasn’t easy either. The recruiters competed directly with the company’s established sales team, and there weren’t enough leads to go around. Four former workers said Fisker’s reservation numbers included many duplicate names in its count, and it was hard to track which customers had connected with a sales worker. With so many on the reservation list, some people would get multiple calls per day from different Fisker representatives.
At one point, customers who had canceled orders began getting barraged with calls from sales workers in an effort to undo their decisions, according to three former workers.
Fisker also began hosting pop-up events to drive sales, some of which it co-hosted with a fan blog, Fiskerati, two former employees said. Some of the parties were student-student meetups in the parking lots of Panera outlets, while other parties were also test-driving parties.
In at least one such case, the event was shut down because Fisker had failed to secure agreement from the site’s owner, the two sources said. Lines of Fisker owners there for repairs also turned up at the events, three former workers said. Fisker told BI that the event at Panera wasn’t a company event.
“At times, it would be hard selling the cars once you take someone on a test drive, and any number of error messages would pop up,” noted one former worker in the sales department. “We got even more honest as time went on, and it became clear the writing was on the wall to the customer on the risk,” they continued.
It was aware of the problems associated with the ADAS, Fisker said, but it was fixed with an update.
Meanwhile, four former workers said, some customers who’d canceled their orders and never paid for the car ended up mistakenly getting delivery of the car anyway. Former Fisker Ocean owner Kurt Mechling told BI he received delivery of the vehicle before signing off on the order or had his payment successfully processed TWICE.
In March, TechCrunch reported that Fisker had, for several months, “temporarily lost track of millions of dollars in customer payments.” Four employees familiar with the matter confirmed to BI that the misplaced payments incident did happen. As the automaker conducted an internal assessment last month around the problem, employees started scrabbling around to identify the missing payments and taking back some vehicles that were delivered in error, according to current employees. Some employees received some urging from the management to have the client threatened that they’re going to place them on a repo list, which involves their credit history, former employees said. But a Fisker spokesperson stated the electric vehicle maker had an “organized process” to deal with issues of vehicles which they had not been paid for that was in line with having followed industry standards.
Facing the threat of a repeat bankruptcy
Over the past year, Fisker has reduced prices by as much as $24,000 on some car models.
The company had warned in March that it would either go out of business or file for bankruptcy by the end of the current year, the stock by May had slashed to 9 cents per share and was even pulled out of the New York Stock Exchange.
Fisker warned employees in an April filing that they might be let go if the company could not find a buyer or additional investor. The company recently filed a notice with the Securities and Exchange Commission, saying it had named a chief restructuring officer vested with “sole authority” over some financial matters — or, in other words, over a potential sale.
The layoffs have cut the staff to the bone. Those sources, who did not want to be identified, said its current workforce is under 100 employees. Many of the workers now remaining, the people said, have been assigned last-ditch operations to clear out Fisker’s remaining stock.
The company also stated that it has no more than 100 workers and is still selling vehicles in the United States and Europe. It declined to specify how many workers remained.
At the same time, employees have chafed at what they perceive to be Henrik and Gupta-Fisker’s refusal to accept responsibility for themselves. A Fisker spokesman in response to the remarks attacking Henrik’s business acumen. “I think it’s a story of ego. He wanted to make a car and stamp his name on it. Henrik is a great designer, but he doesn’t have the business acumen beyond that,” an employee who worked for Henrik at several companies ranging from his first automotive startup. “The lessons he should have learned from the first startup were never implemented and he rushed a car to market once again.”
For Henrik, securing a buyer or cash infusion could partially rescue a reputation for innovation and design that has taken some lumps over the past six months. Without a rescue, the automotive veteran faces the prospect of living through a nightmare scenario: back-to-back bankruptcies.
June 12, 2024: Added that NHTSA insists permanently imported vehicles must be destroyed within three years and that Fisker said it had done so within the allotted period.
