The following is an article from the book Uncle John's Canoramic Bathroom Reader.
(Image credit: Fisker Auto)
Think this story is going to be about fruit? The investors who financed the Fisker Karma probably wish it had been that kind of lemon. Their experience was bitter… but citrus had nothing to do with it.
A HEAD OF THE CURB
In August 2007, a Danish car designer named Henrik Fisker founded a company called Fisker Automotive and set out to design and build one of the world’s first plug-in hybrid cars. Called the Karma, the car would be powered by two electric motors fed by a bank of onboard batteries. If the car was driven beyond the range of the electric batteries, a gasoline-powered engine would spring to life, generating electricity to power the car and recharge the batteries. The batteries could also be recharged in as little as six hours by plugging the car into a conventional wall outlet.
On paper, the yet-to-be-built Karma was more advanced than any car on the market in 2007. The Chevy Volt, which would use similar technology, was still four years off. And though the Toyota Prius, the first mass-produced hybrid car, had been around since 1997, it used a different technology. It wasn’t a plug-in hybrid, so you couldn’t recharge the batteries by plugging the car into a wall outlet. And the Prius could drive for only seven miles on its electric batteries before they were exhausted and the gasoline engine had to take over.
OUT OF GAS
The Karma’s batteries, by comparison, promised a range of up to 50 miles. If you were one of the 78 percent of American commuters who drove fewer than 40 miles to work and back, that meant you could make your daily commute without using any gasoline at all and without generating any air pollution. Then when you got home, you could plug your car in overnight and do it again the next day. As long as you drove fewer than 40 miles a day, there was no limit to how long you could go without using any gas.
What made Fisker Automotive different from other “green car” start-up companies that promised the moon was that Henrik Fisker had actually designed cars before. Not just any cars, either: he’d spent more than a decade at BMW, and in the late 1990s headed the team that designed the Z8, the beautiful roadster driven by Pierce Brosnan in the 1999 James Bond film The World Is Not Enough. In 2001 Fisker moved to Aston Martin, where he designed the stunning DB9 touring car and the V8 Vantage.
Fisker had gotten the idea for his plug-in hybrid in 2003, when he saw Leonardo DiCaprio pull up to the Academy Awards in a Toyota Prius. A lot of people like the unconventional style of a Prius, but it’s easy to understand why a designer of BMWs and Aston Martins would not. “I thought, ‘There’s got to be a market for an environmentally friendly car that goes beyond the Prius.’ That was my first inspiration,” Fisker told the BBC in 2012. He resolved to give the world a high-performance hybrid car every bit as beautiful as the supercars he’d designed in the past. He called his concept “responsible luxury” and “sustainable design without compromise.”
(Image credit: Tuner tom)
As Fisker fleshed out the details of the Karma, he filled it with one environmentally friendly feature after another.
• If you wanted a leather interior, Fisker promised to buy the hides from a sustainable slaughterhouse (whatever that is) and to use as much of each individual hide as possible, including parts with scratches and other imperfections, to minimize the number of animals butchered for your driving pleasure. Vegans and animal lovers who wanted a cruelty-free interior could order “100 percent recycled post-industry virgin polyester ultrasuede” instead of leather.
• To save trees, the Karma’s interior was trimmed with the buyer’s choice of three types of wood taken from trees that were already dead: “Fallen Wood,” mahogany harvested from old-growth trees knocked down in storms; “Rescued Wood,” walnut salvaged from a 2007 California wildfire; and “Sunken Wood,” white oak retrieved from century-old logs fished from the bottom of Lake Michigan.
• The Karma’s roof incorporated a solar panel that recharged the car’s batteries, in the process giving owners “up to 200 miles per year of completely emission- and cost free-driving.”
• The exterior was painted with water-based paint that got its sparkle from flakes of recycled glass added to the paint.
Packed with all of these green features and more, plus boasting uncompromising performance and a top speed of more than 125 mph, the Karma was not going to be cheap— Fisker calculated that it would top out at more than $ 100,000. But he also figured that there would be plenty of Leonardo DiCaprios out there willing to pay handsomely for a guilt-free supercar.
(Image credit: FaceMePLS)
The final design that Fisker came up with was every bit as breathtaking as the cars he’d designed for BMW and Aston Martin. One auto industry analyst called it “perhaps the most beautiful car ever made.” Prospective investors who got a look at it, and at Fisker’s impeccable résumé, eagerly ponied up the cash he needed to get his company off the ground. Between November 2007 and March 2009, he raised more than $ 94 million from wealthy individuals (including Leonardo DiCaprio) and Silicon Valley venture capitalists, plus component suppliers who hoped to make a bundle selling parts to Fisker Automotive once it was up and running.
The endorsement of so many sophisticated investors impressed the U.S. Department of Energy, which had a program to fund green-technology auto companies like Fisker. In 2009 the DOE approved a $528-million line of credit for Fisker Automotive. The line of credit came with plenty of strings attached— only $169 million of the money would be used to bring the Karma to market. The rest, which would be released only if strict production figures and sales targets were met, would be used to fund the creation of a second, cheaper plug-in hybrid, to be called the Atlantic, that more people could afford. The Atlantic would also have to be manufactured in the United States, creating American jobs in the process. (The Karma, at least at first, would be built in Finland.)
Just as the early investors had stimulated the Department of Energy to act, the DOE’s endorsement prompted a surge of new investors who wanted in on the ground floor. By June of 2011 they would pump another $500 million into Fisker.
But as these investors would soon discover, Henrik Fisker was better at designing cars than he was at building and running car companies. He was a designer, after all: his area of expertise was making cars look good. Engineers would have to make the Karma run as beautifully as it looked, but rather than hire them in-house, Fisker subcontracted the engineering work to outside companies that were hired to make individual components.
(Image credit: Steve Jurvetson)
No one at Fisker Automotive paid enough attention to making sure that components made by different contractors worked well together when assembled in the car. Working out the bugs caused huge delays and sent costs soaring, a problem the company made worse by stockpiling millions of dollars’ worth of parts before the glitches had been fixed. Then, when it turned out that many of the problems could only be solved by re-engineering and remanufacturing the parts, the stockpiled parts became obsolete and worthless. It’s estimated that the company spent as much as $100 million on parts it couldn’t use, forcing it to cough up another $100 million to replace them.
Another problem: the schedule Henrik Fisker negotiated with the Department of Energy to keep the line of credit open was wildly unrealistic. He had agreed to deliver both the Karma and the Atlantic in less than two years, something that even established auto companies wouldn’t have been able to pull off. (It took GM nearly four years to bring the Chevrolet Volt to market.) Fisker either didn’t realize the schedule was unrealistic, or he assumed that the Department of Energy would be flexible. It wasn’t. When Fisker Automotive fell hopelessly behind schedule, the DOE froze the line of credit after Fisker had drawn “only” $196 million of the $528 million available.
By now Fisker Automotive had burned through much of the cash it had raised from investors and was starting to fall behind on payments to its suppliers. The pressure to have something to show was intense, so in July 2011 the first handful of defective Karmas began straggling off the assembly line. Leonardo DiCaprio got one of the first Karmas; no word on how well his ran. Several months later Consumer Reports magazine bought a Karma to road test, but before it could be put through its paces, the car died and had to be towed back to the dealership. “We buy about 80 cars a year, and this is the first time in memory that we have had a car that is undriveable before it has finished our check-in process,” the magazine wrote on its blog in March 2012.
OUT OF JUICE
The problem with the Consumer Reports car was traced back to defective batteries manufactured by a company called A123 Systems. The same batteries in other Karmas had caused the cars to catch on fire, and A123 Systems spent so much money recalling and replacing the batteries that it went bankrupt in October 2012. Since it was the only supplier of batteries for the Karma, production of the car screeched to a halt. It never started again.
How did Fisker Automotive respond to these and other troubles? By painting a rosy picture and continuing to raise money. By the end of 2012 it had pulled in another $515 million from investors, bringing the total raised to $1.15 billion, not including the line of credit from the DOE. And it burned through the cash almost as quickly as it came in. By April 2013, it had just $20 million in the bank and Henrik Fisker was out— he resigned following “disagreements” with management.
Fisker Automotive stumbled on for another seven months, then declared bankruptcy in November 2013, after spending nearly $1.4 billion and having fewer than 2,500 finished cars to show for it— a cost of more than $500,000 per car. Today Karmas sell on eBay for as little as $50,000, though there are few takers. (If you decide to buy one, you might ask the seller to throw in a tow truck.)
The article above is reprinted with permission from Uncle John's Canoramic Bathroom Reader. The latest annual edition of Uncle John’s wildly successful series features fascinating history, silly science, and obscure origins, plus fads, blunders, wordplay, quotes, and a few surprises
Since 1988, the Bathroom Reader Institute had published a series of popular books containing irresistible bits of trivia and obscure yet fascinating facts. If you like Neatorama, you'll love the Bathroom Reader Institute's books - go ahead and check 'em out!