Two Chinese-backed firms vye for Fisker Automotive, eyeing its patents

Two Chinese-backed firms are vying for Fisker Automotive, maker of Karma cars, with an eye on its patents and entry into the US market

PUBLISHED : Saturday, 08 February, 2014, 5:12am
UPDATED : Sunday, 09 February, 2014, 1:53pm

Two Chinese-backed companies are locked in a bidding war, due to culminate next week, to take over bankrupt carmaker Fisker Automotive in the United States.

The prize is 18 patents and a possible toehold in US and Chinese markets. The rest is a harder sell.

Fisker has not made a vehicle since 2012. Its US$103,000 plug-in hybrid sports car, Karma, was called a "basket case" by Consumer Reports. The company, which lost US$139 million in US taxpayer money, was labelled a "loser" by Mitt Romney during 2012 presidential debates. Its most visible asset is a derelict former General Motors factory that Fisker never used.

Wanxiang Group emerged in December last year as a suitor for Fisker, challenging Hybrid Tech, a Chinese-backed firm that had been jockeying to take over the bankrupt carmaker. The rivals' interest prompted a bankruptcy judge to set a February 12 auction for Fisker's assets.

"It's not about the manufacturing," said Steven Szakaly, the chief economist at the National Automobile Dealers Association. "It's about the intellectual property."

Fisker's 18 patents cover grille designs, a fender vent and electric-vehicle drive-train technology, according to the database of the US Patent and Trademark Office.

It also has at least 18 more patent applications pending, including in aluminium sub-framing and solar-car technologies, said Charles Shifley, a patent lawyer at Banner & Witcoff.

The patents have many potential applications for buyers eager to break into the growing alternative-fuels market, said Blair Jacobs, a patent lawyer with McDermott Will & Emery.

"To have a jump-start with a portfolio that took three to five years to develop is really substantial," Jacobs said.

For a Chinese suitor, the Fisker package holds particular promise. The assets would let the buyer revive the Fisker brand in the world's biggest car market, which is struggling to reduce some of the globe's worst air pollution. It would also provide an entry point to selling cars in the US.

The battle for Fisker pits Hybrid Tech - led by Richard Li Tzar-kai, the head of telecommunications giant PCCW - against Wanxiang, China's largest car-parts supplier founded by Lu Guanqiu.

Wanxiang owns B456 Systems, the successor to A123 Systems, the US company that supplied batteries to Fisker until collapsing under the cost of recalling defective Karma power packs. It would make sense for Wanxiang to buy Fisker after acquiring the battery-maker, Shifley said.

The Karma was designed by Henrik Fisker, who won plaudits for his work on cars for BMW and Aston Martin. Karma drivers included singer Justin Bieber and actor Leonardo DiCaprio.

With the Karma still in the design stages, Fisker in 2009 won the largest loan commitment to a start-up company from a US Department of Energy programme to develop alternative-fuel vehicles. Most of the US$529 million was predicated on Fisker manufacturing cars in the US.

That did not happen. Fisker failed to meet production milestones for the Karma, which was made in Finland. The energy department froze the loan after distributing US$193 million.

In April last year, after firing most of its workers, Fisker defaulted on the loan without making a payment.

Hybrid Tech last year paid the energy department US$25 million - about 15 per cent of the balance - to assume ownership of the loan, putting it in a favourable position to take over Fisker's remains. The department sold the loan to salvage what it could from the money Fisker had drawn down.

Fisker filed for bankruptcy protection in November under an arrangement calling for the group led by Hybrid Tech to trade its ownership of the loan for the carmaker's assets.

That plan was derailed in December, when Wanxiang told the court it wanted to bid.

Hybrid Tech's latest bid was US$55 million, including the US$25 million for the US loan. Wanxiang has offered US$35.8 million in cash, up US$10 million from its first offer.

The duel is being watched in Wilmington, Delaware, where Fisker spent US$20 million in 2010 to buy the abandoned GM plant.

Hybrid Tech, as a condition of acquiring the Fisker loan, is required to manufacture in the US. Wanxiang is not bound by that agreement, although US Secretary of Energy Ernest Moniz said that "terms of our loan have to be respected".

"We have technology transfer limitations," Moniz said at the Washington Auto Show last month. "No matter who the winner is, we will be looking at both engineering and manufacturing in the US. That's the key for us."

Both companies say they are interested in using the US plant.