Can Fisker Create Better Karma Second Time Around?

As Fisker ramps up for its return to the luxury auto market with an updated version of its Karma plug-in hybrid luxury sports car, more than a few industry analysts question the brand’s viability going forward, citing its history of missed production deadlines, ongoing funding problems and, ultimately, bankruptcy.

Jim Taylor, chief marketing officer of what is now Fisker Automotive and Technology, answers doubts about his company’s market readiness with two words: Wanxiang Group, the name of the privately owned corporation that bought the automaker’s assets in 2014.

The China-based multinational auto-parts manufacturer, under the guidance of founder and chairman Lu Guanqiu, has since provided a steady stream of capital, Taylor tells WardsAuto in a phone interview, and reinvigorated the automaker’s vision of an electrified, eco-friendly product line that competes fiercely in the luxury auto segment.

Lu “is sitting in a country, in a government and in a social structure that is very aggressive on trying to figure out how to solve their air-quality problems and their energy problems. They’re not looking at next quarter or next year...but a long-term solution this world’s got to come to,” Taylor says. “He is absolutely, emotionally connected to this idea of cleaner air and a better way to go.”

Ironically, Fisker initially had objected to the acquisition bid, citing the fact Wanxiang owned A123 Systems, the battery manufacturer that had its own financial troubles and stopped supplying Fisker in the run-up to the automaker’s eventual bankruptcy.

Lawyers representing the automaker in U.S. Bankruptcy Court argued Wanxiang was responsible at least in part for Fisker’s business failure and then seemed to be positioning itself to profit from the bankruptcy sale. Still, after announcing it planned to restart production of the Karma – the first of Fisker’s models to reach the production stage – with new deliveries likely by mid-2015, Wanxiang received court approval to take over Fisker on Feb. 18, 2014.

Deliberate Development

Now, Wanxiang’s backing gives Fisker a greater amount of creative freedom and the ability to avoid many of the pitfalls suffered by the brand during its first marketplace go-around, asserts Taylor, a former general manager for Cadillac who also previously headed up General Motors’ Hummer brand and afterward served as CEO of a startup that converted SUVs into electric-powered vehicles before joining the so-called New Fisker.

“I’ve seen this video a few hundred times and...it’s like the auto industry, we can’t help ourselves, we’re anxious to tell everybody what we’re about to do. And so you get out way before you really know what’s going on, and you make all these statements, promises, commitments...and then you end up not living up to them and you get beat to death for not meeting them,” he says.

“Fisker 1.0 had super-high volume projections and super-aggressive launch dates,” Taylor explains. “They just didn't have enough time to finish their cars off. There was a lot of pressure from financial entities to ‘get it out, get it out, get going,’ so they weren’t able to complete their engineering to the degree you normally would...like to have time to do.”

Perhaps the biggest difference “between Fisker then and now is that we’re not under this enormous pressure for money that they were in the fundraising. We don’t have loans, covenants and guarantees that say you have to produce a car by such-and-such a time or else. So, we can take the time to do it properly.”

Fisker Without Henrik Fisker

Originally built in Finland and priced from the onset at about $102,000, the Karma was designed by company namesake and co-founder Henrik Fisker, who resigned before the bankruptcy was filed and has spent the past couple years tooling around his design studio in Los Angeles and thinking up modified versions of already beloved high-performance cars, such as newer-model Ford Mustangs.

Acclaimed for his previous design work on cars such as the Aston Martin DB9, Aston Martin V-8 Vantage and BMW Z8, Fisker recently announced plans for a new automotive company – unconnected to the New Fisker – with designs geared toward the Millennial generation aged roughly 18 to 34.

A 4-passenger, range-extended electric sedan with rear-wheel drive, the Karma has won celebrity admirers like Ashton Kutcher, Leonardo DiCaprio, Matt Damon and Justin Bieber, with its elegant styling and still earns praise as one of the most beautifully designed cars ever developed.

Soon after it was unveiled it was awarded a series of industry honors, including distinction in 2009 as the first electric vehicle selected as North American Production Preview Vehicle of the Year by the North American Concept Vehicle of the Year Awards.

The Karma also was included in 2009’s “Green Design 100” list of eco-friendly rides by Time magazine, which subsequently named the model as one of the “50 Best Inventions” of 2011, the year Karma models initially started rolling off the line.

Regardless of such accolades, however, production of the sleek sedan, which saw the rollout of about 2,450 units before being halted a year after it started, was plagued by numerous engineering and manufacturing setbacks, including faulty batteries that led to costly recalls. The automaker was hit as well by the loss of more than 300 Karmas in a New Jersey storage area flooded during Hurricane Sandy in 2012.

Unable to pay off a $139 million federal loan, in addition to nearly $1 billion in creditors’ claims, Fisker filed for bankruptcy in 2013.

Building Infrastructure

With those notable stumbles still visible in Fisker’s rear-view mirror, says Taylor, “I don’t want to get into that trap where we pre-announce, over-commit and then end up delay, delay, delay.”

That’s why, despite recent news reports that Fisker aims to restart Karma production by mid-2016 – and production of the Atlantic, an all-new, lower-priced PHEV in 2017 – Taylor declines to forecast any production plans, other than to confirm the Karma will be built at a new 555,670-sq.-ft. (51,620 sq.-m) manufacturing facility in Moreno Valley, CA, a relatively young community located in the shadow of the U.S. Air Force’s March Joint Air Reserve Base and about 60 miles (100 km) northeast of Fisker’s year-old headquarters in Costa Mesa.

Wanxiang confirms A123 Systems, which not only has regained its financial health but also reportedly is on track this year to turn a profit, again will be the battery supplier for Fisker, but this time with a new and improved design.

Designed to include a showroom and offer tours of its manufacturing operation, the plant is expected to bring at least 150 new fulltime manufacturing jobs to an area still reeling from the nationwide economic downturn that began in the late 2000s.

Of course, before any long-term advantages can be gleaned from the Fisker deal, the automaker will need to regain a foothold in the eco-friendly premium-vehicle segment it forged back in 2008 with the introduction of the Karma, but which now is dominated by Tesla Motors, the only startup company so far that’s managed to deliver high-end, long-range green vehicles at production volumes.

Meanwhile, 2015 sales numbers of electrified vehicles – including all-electric models, traditional hybrids and PHEVs – continue to lag far behind industry goals. That segment is on track to account for nearly 3% of this year’s total vehicle sales in the U.S., just as it did in 2012.

Industry-Watchers Not Electrified

Auto writer James Sapienza of The Cheat Sheet.com echoes the doubts of many media observers that Fisker can survive again when he writes: “In the span of six years, Fisker went from automotive supernova to footnote. But three years after its untimely death, the Karma’s beautiful styling and untapped potential are alluring enough for a lot of people to take a risk on it, even as the auto industry continues to evolve faster than ever before.

“While former rival Tesla prepares to launch two new models, and a number of major automakers now offer plug-in hybrid versions of their premium sedans, can the dated Karma hope to compete, especially if it’s sold for anything close to its original six-figure price tag?”

Similarly, in a Los Angeles Times report about Fisker’s plans, reporters Charles Fleming and Roger Vincent write the green-car market may not be the most welcoming to newcomers because “while many other car companies have fielded many variations of battery-electric and electric-hybrid automobiles, the alternative-fuel vehicle market has struggled to gain momentum.”

The article goes on to quote Karl Brauer, a senior analyst with Kelley Blue Book, who notes the alternative-fuel segment has been and continues to be the one portion of the auto market that’s not expanding.

From an investment perspective, Jim Woods, editor-at-large for the Money Threats website, asks in a recent post: “Will the return of a high-end electric rival to Tesla Motors be a threat to (founder) Elon Musk and company?...The short answer: Not likely.

“It’s hard to think of the flopped Fisker as anything more than a wannabe electric player.”

A Harris Poll of 2,225 U.S. adults surveyed online in May showed about 48% of American car owners – or anticipated owners – say they would consider a traditional hybrid the next time they’re shopping for a new vehicle.

The survey also suggests PHEVs generally claim even lower consumer interest, with hybrid versions coming in at 29% and all-electric plug-ins garnering only 21%, while 19% of potential car buyers would consider diesel, but 35% would consider a smaller or another traditional combustion-engine vehicle to save on costs.

“I think you've got plenty of good arguments around that you’ve got almost a false economy driven by the regulations that set up the obligations for vehicle manufacturers to make (eco-friendly vehicles) whether they what them or not and then dress them up enough so that people are willing to buy them,” Taylor says.

“It’s a big experiment in introducing an advanced technology in any industry, but at the early stage where it’s too expensive, what do you do?”

He adds the push to electrify the auto industry has become a “chicken and egg” scenario that boils down to the battery industry “having enough volume that it’ll attract enough (R&D)...it’ll drive the cost down and that’ll drive the manufacturing (volumes) up.

“That whole lane started hot, with a lot of investment in batteries and a lot of government subsidies, but then the other half never came, where the car volume was not ready to absorb it.”

At Home at the High End

At the low economic end of the EV market, where production vehicles such as the Nissan Leaf and Chevrolet Volt compete for volume sales, “that’s tough, because now you got consumers that legitimately are trading off, in the budget area that they live in – ‘Boy, I can get a Chevy Cruze that does X, or a Chevy Volt that does Y,’ and that’s a tough sell.” Taylor says. ‟Money matters.”

At the other extreme, where “someone’s going to pick up a $100,000 Tesla or a $150,000 BMW i8...you got a different mindset there,” Taylor says. “The consumer has got, obviously, a different bank balance and a different set of priorities. They’re not worried about $50 a month one way or the other on a lease...you have a different set of purchase considerations.

“The advantage we have with Fisker is that’s where we’re playing...the luxury-vehicle market is still there, it’s still relevant. ‘Luxury 101’ is exclusivity...making a statement.”

If a potential buyer “is going to drop this kind of money for a car it has to be seen as equal to the kind of quality that people are absolutely expecting in that segment,” Taylor says, adding the goal is to offer enough reasons for a potential Maserati or Aston Martin buyer to give Fisker similar consideration.

Although Taylor doesn’t offer specifics, several media reports have pegged the base price of the new Karma at $135,000.

Even though the leadership team from the first Fisker didn’t fare well business-wise, it excelled in connecting and cultivating consumers, as well as developing lasting brand equity – as confirmed in the small but loyal number of Karma owners who have stayed in touch with the company and each other over the many months, waiting patiently for Fisker’s return to the market, Taylor says.

“If you think that they bought the vehicle and then had to go through the desert for a while where there were no (charging) ports and no dealers, you got to be really loyal.”

As part of the Karma relaunch, an effort is under way to reconnect with those who already own Karmas and provide them with not only a much more extensive network of service locations, but also a series of new applications for enhancing the performance of their cars.

As for Fisker’s apparent car-in-waiting, the smaller Atlantic sedan, which was in its initial development stages and had been slated for production at a facility in Wilmington, DE, when the automaker’s financial troubles came to a head, don’t look for delivery news anytime soon, Taylor says.

“We’re at the front end of the Atlantic with all kinds of necessary questions,” he says, but the Fisker team has concluded “we’ve got to focus, focus focus on the Karma and the Karma launch. We’ve got to get it right. There is no second chance here for us.”