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U.S. Said to Hire Restructuring Adviser to Monitor Fisker

The U.S. Energy Department, which has loaned $193 million to Fisker Automotive Inc., hired a restructuring adviser to track the company’s capital-raising efforts, people familiar with the hiring said.

The agency retained Los Angeles-based Houlihan Lokey after freezing the automaker’s $529 million credit line because of delays with Fisker’s $103,000 plug-in hybrid Karma sedan, said two of the people, who asked not to be identified because the assignment isn’t public. Russell Datz, a Fisker spokesman, said yesterday he couldn’t confirm the work.

“To ensure the strongest possible management of its portfolio, the department’s loan program often hires industry- leading consultants to supplement the work performed by experts in the program,” the Energy Department said in an e-mailed statement that didn’t comment on Fisker. “In October 2011, the department contracted with Houlihan Lokey to provide expert assistance on a variety of projects in the portfolio.”

Fisker failed to start making or selling cars by deadlines tied to its U.S. loan agreement, said a person familiar with the matter. The Energy Department approved Fisker for $529 million in federal loans in 2009 from a program intended to encourage the development of advanced-technology vehicles. Fisker was using the money to develop the Karma and to revamp a former General Motors Co. (GM) factory in Wilmington, Delaware.

In February, Anaheim, California-based Fisker disclosed that the government froze its credit line last year after it missed deadlines related to the Karma’s development. Fisker had drawn down about $193 million. The company, with 47 U.S. dealers, said it has delivered about 800 Karmas and generated more $100 million in revenue.

One-Year Contract

Houlihan has worked for the Energy Department on a number of troubled companies under a $1.35 million contract awarded last October that is due to expire Nov. 15. Houlihan advised the agency about Beacon Power Corp. (BCONQ), an energy-storage company, said the people.

The Energy Department’s loan programs have drawn congressional scrutiny since the bankruptcy of solar-panel maker Solyndra LLC, a loan-guarantee recipient, in September.

Senator Charles Grassley, an Iowa Republican who is his party’s ranking member on the Senate Judiciary Committee, called Fisker “one of the more unusual recipients” of the Energy Department’s vehicle loans in a letter yesterday to Energy Secretary Steven Chu. Grassley and Senator John Thune, a South Dakota Republican, asked Chu to respond to questions about awarding a loan to a luxury carmaker.

Private Capital

“Our loans and loan guarantees have strict conditions in place to protect taxpayers,” the Energy Department said in a statement responding to the Grassley letter. The agency “is working with Fisker to review a revised business plan and determine the best path forward.”

Fisker, trying to become profitable selling cars powered by lithium-ion batteries and gasoline, has raised more than $1 billion from private investors. It may use the money to resume work on the Delaware factory where it had planned to build a second, less-expensive model, the Atlantic.

The Karma, designed by company co-founder Henrik Fisker, is produced by Valmet Automotive Oy, a contract manufacturer in Uusikaupunki, Finland. Prior to starting his own company, Fisker designed cars for Bayerische Motoren Werke AG and Aston Martin.

Fisker will decide before the end of the third quarter where to build the Atlantic, Chief Executive Officer Tom LaSorda told reporters earlier this month. The decision will be based on “what’s best for the company,” not on Energy Department funding, he said.

The U.S. awarded Fisker $169 million for engineering of the Karma and $359 million for Atlantic production.

Karma Recall

The Karma, with a range of 30 miles (48 kilometers) to 50 miles on lithium-ion battery power before a gasoline engine engages, was recalled in December to fix a battery-pack clamp. Fisker sold 250 Karmas in March and expects to sell 4,000 by the end of the year, LaSorda said this month.

Last month, the closely held company said defective battery packs supplied by A123 Systems Inc. (AONE) caused a Karma to shut down during tests by Consumer Reports magazine.

LaSorda visited A123’s factory in Michigan to investigate the defect, which turned out to be a welding flaw, he said. The battery supplier is absorbing the costs of the recall, said LaSorda, a former chief executive of the predecessor of Chrysler Group LLC.

Fisker is backed by investors including Kleiner Perkins Caufield & Byers and Palo Alto Investors LLC. A123 is also a shareholder in Fisker.

Separately, Fisker yesterday announced plans to distribute its cars in the Middle East and North Africa, following sales in North America and Europe.

To contact the reporters on this story: Mark Clothier in Southfield, Michigan at mclothier@bloomberg.net; Jeffrey McCracken in New York at jmccracken3@bloomberg.net; Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

To contact the editors responsible for this story: Jamie Butters at jbutters@bloomberg.net; Jennifer Sondag at jsondag@bloomberg.net; Bernard Kohn at bkohn2@bloomberg.net

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