Only a week ago, it seemed, EV start-up Faraday Future was down for the count. Now, however, it may have a new lease on life, after appearing to resolve a dispute with its primary investor.
That said, the California-based carmaker isn’t out of the woods. That investor, China’s Evergrande Health, has simply agreed to step back on its stake in the company. Faraday must now find a new primary investor that will help it resume operations, starting with bringing back a major portion of its workforce laid off in recent weeks.
Under the agreement, the two parties will “terminate the previous investment contract, withdraw and waive all litigation and arbitration proceedings, and release all security including the asset preservation pledge and equity financing rights,” Faraday said in a statement.
It certainly wasn’t supposed to go this way when, three years ago, the start-up held its first splashy news conference at the Consumer Electronics Show in Las Vegas. Faraday showed off a flashy supercar as it announced a goal of getting into production by late 2018. A year later, the company returned to CES, this time with the FF91, the model it said it actually planned to build.
(Faraday Future furloughs more employees. Click Here for the story.)
Soon, the company was breaking ground on a plant site just outside Las Vegas, and making grand predictions about the future where it would serve as a “new species” of carmaker.
Then the floor collapsed. The company’s original primary investor, Chinese tech billionaire Jia Yueting, ran into a series of financial setbacks that caused him to pull back from both Faraday and another EV start-up, LeEco. Faraday was forced to cancel plans for the Nevada factory, though it soon acquired an existing facility in Central California.
Things looked promising when Evergrande came on board last year, agreeing to buy 45% of the carmaker for $2 billion that would be paid out through 2020. But it never followed through and by last autumn, Faraday was running out of cash. In October, as it announced a first wave of layoffs, co-founder Nick Sampson declared in a blog post, “The company is effectively insolvent in both its financial and personnel assets.”
(Click Here for more about why Faraday Future insists it isn’t going away.)
The remaining Faraday management team denied that claim and continued pushing forward, even as they took Evergrande to court in Hong Kong. But, by late November, the cash coffers were so bare Faraday had to lay off the majority of its remaining workers and ask the rest for sharp pay cuts.
The company insists it has continued working on the FF91 and says it has a number of pre-production prototypes ready. But it far from certain when – indeed, if – it will be able to get into production at its new plant in Hanford, California. The latest schedule calls for that to begin by early this year but there doesn’t appear to be enough cash and Faraday has had problems with suppliers that would likely limit their willingness to ship parts and component, sources have told TheDetroitBureau.com, until they are assured of being able to get paid.
Under the new agreement, Evergrande will still hold a 32% stake in Faraday Future, but the carmaker will have to go looking for new investors. Who might be willing to come onboard considering its history is far from certain.
(Faraday fritters away funding. Click Here for our earlier report.)
Faraday also has to rebuild its staffing from top to bottom. Of its founders only Yueting remains linked to the company. Meanwhile, many of the rank-and-file, from engineers to workers at the Hanaford plant, have reportedly gone looking elsewhere. How many will return once they can be assured of getting paid is up in the air, as well.