Summary:

Fisker Automotive should have ended the year on a good note – after several delays, the startup finally began delivering its first-ever car the Karma, to customers in the second half of 2011. Instead, the company is recalling 239 Karmas over faulty batteries made by A123 Systems.

Ray Lane's Fisker Karma

Fisker Automotive should have ended the year on a good note – after several delays, the startup finally began delivering its first-ever car, plug-in hybrid Karma, to customers in the second half of 2011. Instead, the company is recalling 239 Karmas over faulty batteries made by A123 Systems

The National Highway Transportation Safety Board posted a notice this week for recalling 239 cars that were made from July 1 through Nov. 3 this year. The problem: hose clamps of the lithium-ion batteries that “may have been positioned incorrectly during assembly.” If that were the case, the hose could get caught by the battery compartment cover and lead to a coolant leak. And if the coolant gets inside the battery, then it could cause an electrical short cuicuit and catch fire. Fisker plans to replace the batteries in those cars.

The recall presents a substantial setback for California-based Fisker, which began delivering the Karma over the past summer. The company’s initial plan was to start shipping the car in 2009 and become profitable in 2011. This Summer the company again delayed shipment of the cars because the proper state and federal certifications hadn’t been met (those have been met now).

Fisker is not the first electric car startup to postpone new car launches, but needless to say, executing the launch when it does finally happen is crucial for the financial health and reputation of a young company.

The 239 cars being recalled represent a good chunk of the Karmas it had rolled out of the assembly lines before it caught the problem. Fisker’s CEO, Henrik Fisker, told Bloomberg on Dec. 21 that it had shipped 225 Karmas to dealers and the company was making 25 cars per day.

The company first reported the battery problem on Dec. 21, according to the transportation safety board’s notice. A123 disclosed the hose clamp issue on Dec. 23 and said it was looking at fixing the problem in fewer than 50 cars. Fisker also posted an undated note that said it was replacing battery packs in 50 cars and was “making modifications to address the issue in the more than 1,200 Karmas already produced and in production.”

Fisker already has raised over $1 billion in loans, grants and equity by April this year and is backed by high-profile venture capital investors such as Advanced Equities, Kleiner Perkins, NEA and A123. Fisker won a $528.7 million loan from the U.S. Department of energy back in September 2009. The same program doled out funds to electric car maker Tesla Motors, which went public, and large automakers Ford Motor and Nissan North America. Fisker was one of the few startups, along with Tesla, to get funding from the program.

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