The announcement is another way that Tesla is trying to innovate around its business model, and also deliver more premium services to its customers. Tesla announced earlier this month that it will turn its first profit in the first quarter of 2013, for both non-GAAP and GAAP (generally accepted accounting principles), and will pay back its loan from the Department of Energy five years ahead of schedule. Tesla’s stock shot up this week and hit a high of $53.74 per share.

Tesla’s news is contrasted with the ongoing problems with Fisker Automotive, which was the focus of a hearing on Capitol Hill this week. Fisker seems to be close to bankruptcy and earlier this week the Department of Energy seized $21 million from a reserve account that Fisker was holding.

“Our service is O.K., but it needs to be great,” said Tesla CEO Elon Musk on a call. “What is the best service and warranty that we can afford to do and this is it,” said Musk.

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It’s scripted to the extent that the Oversight and Government Reform Committee already sent me a quote that’s supposed to sum up the hearing before it occurs. Committee Chairman Jim Jordan, R-Ohio, said:

It is hard to understand why the Department of Energy ever thought Fisker was a viable company that should receive taxpayer money. The Obama Administration owes the American taxpayer an explanation as to why this bad loan was made in the first place, and what they are going to do to minimize the loss that taxpayers face.

Well, I do agree with that statement, even if I don’t agree with the need to conduct a long hunt for some political cronysism between Fisker and the DOE over the loan. As I said in my piece on Fisker published last week (A Look Under the Hood: Why Electric Car Startup Fisker Crashed and Burned), I think the search for political cronyism is actually distracting from the disturbing financial story of Fisker’s now defunct broker Advanced Equities, which worked with Fisker’s VCs to raise over $1 billion without much value to show at the end of the company.

Reading through Henrik Fisker’s prepared testimony this morning, it’s also interesting to see his perspective on Fisker now that he’s not working with the company any more. He mentions numerous times in his testimonial that the company sold 2,000 Fisker Karmas that “perform well and customers love them,” and are “operating smoothly and continue to receive fantastic customer reviews.”

That’s not necessarily true. Fisker customers have been coming out of the woodwork and complaining about problems with the cars, and how they’re having trouble dealing with these problems now that the company is in financial dire straits. In March, Karma customer Kelly Stewart actually filed a lawsuit against Fisker and a dealership in Greenbelt, Maryland called Capital Cadillac Company claiming that the car was not performing as expected (the complaint and an exhibit letter embedded below).

Ms. Stewart bought a Karma in March 2012, and three weeks later she said she had electrical, battery, alignment, and heating and cooling problems. In the letter (Exihibit B) from the Maryland dealership to Fisker the dealership exec wrote:

It [the Karma] has been out of service for 87 days even though it is less than 9 months old and has less than 8,000 miles on it. To date the dealer has been unable to correct the problems and it is out understanding that these problems are systemic with these cars.

Problems with the Karma cars have also been documented by Consumer Reports’ second review (the one it did again after the first Karma car it bought almost immediately died), and Consumer Report’s review gave the Karma a failing grade.

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Updated at 8:30AM: I’ve heard that 160 Fisker employees were let go this morning, and 53 employees will stay on to manage further negotiations with the Department of Energy and a potential sale of assets.

I’ve also heard that law firm Outten & Golden has been looking into initiating a class action law suit to represent Fisker’s employees should Fisker fall into bankruptcy. The firm is looking into whether Fisker (like Solyndra) will or already has violated the WARN act.

The news follows reports that Fisker has hired a law firm to advise it on bankruptcy options. It owes a loan repayment to the Department of Energy this month, and has been cutting costs and furloughed its employees last month. The company hasn’t made a car since the summer of 2012.

Earlier this year Fisker was trying to make deals with Chinese auto makers for an acquisition or a partnership, but those seem to have fallen through. Fisker also announced last month that its celeb designer founder Henrik Fisker had resigned over internal disagreements.

Fisker was founded in 2007 and has raised over a billion dollars from venture capitalists like Kleiner Perkins, NEA and others, as well as wealthy individuals organized by now defunct broke Advanced Equities. Fisker also received part of a loan from the Department of Energy.

The company built a high-end electric hybrid sports car called the Karma, and shipped thousands of these to customers. But the company faced problems with recalls, software glitches, a battery supplier that went bankrupt and lost hundreds of Karmas in superstorm Sandy.

For some more background, read my previous post: Tesla, Fisker, and what could have been: A tale of two electric car startups

We’ll update this story today as we hear more.

Updated at 8:25 AM, April 5, with the number of employees I heard were let go.

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There’s conflicting reports about why talks with the Chinese auto companies have grown cold. The WSJ says it’s because Fisker wants to try to get the remaining amount of the loan from the Department of Energy that was frozen, and restarting such a loan would mean Fisker’s next car would have to be built in the U.S. The Chinese companies would probably want to build the car in China where it would be lower cost. PluginCars says that the Chinese giants are less interested after looking under the hood of Fisker and realizing the company doesn’t own a lot of the technology in its vehicles.

Fisker hasn’t made one of its hybrid electric sports cars, the Karma, since the Summer of 2012. The company was plagued by problems in 2012, including the bankruptcy of its battery maker A123 Systems, hundreds of cars lost to superstorm Sandy, software glitches and recalls in the Karma cars that were made, and the loss of part of its loan from the Department of Energy for not meeting milestones with its Karma. The broker that was helping raising money for Fisker, Advanced Equities, also shut down after getting in trouble with the SEC.

Fisker founder and former CEO Henrik Fisker resigned earlier this month. The company has a loan repayment of part of the $192 million that it was able to secure from the DOE next month. Fisker raised over a billion dollars from private investors. It’s Karma car is owned by some well known customers including actor Leonardo DiCaprio, hip hop artist The Game, pop artist Justin Bieber, former Vice President Al Gore, and actor Matt Damon.

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The three companies suffered from different setbacks, though all are facing the fact that consumers and companies are adopting electric cars more slowly than expected. And the necessary next-gen batteries are still too expensive. Looks like Tesla is the last man standing when it comes to the aggressive electric car startups that launched over the past few years — and even it is not without risk.

If Better Place can’t make it in Israel. . .

Electric car infrastructure company Better Place started rounds of layoffs as its first network in Israel has been moving more slowly than expected. The Globes says Better Place Israel has already laid off 140 employees and will be cutting another 150 to 200. There were 400 employees at the company before the first round of layoffs. The company only sold 23 cars in November, its slowest month to date, said the Globes report.

The layoffs are disconcerting because Israel is essentially the proving ground for Better Place’s business model. Yes, Denmark is another early market, too, but in Israel, Better Place — and founder Shai Agassi — had a particularly close connection to the Israeli government and important investor Israel Corp.

Better Place, which launched in the winter of 2007, builds out electric car charging infrastructure and battery swap stations and then sells electric car charging and a subsidized electric car (Updated: made by Renault, part of the Renault-Nissan Alliance) like a wireless carrier would sell cell phone service. The company made some amazing strides in past years by managing to convince Israel and Denmark to act as early markets, by partnering with Nissan, and by raising so much money.

But the problem is that it’s expensive to build out the needed network to make the service work optimally. Whenever I asked Agassi in previous interviews throughout the years about that issue, he always waved away the seemingly high capital expenditures needed to build these networks. He commonly would compare the costs of the network to the prices of oil imports.

But if you’re working with investors, at some point they want to stop losing money and they want to start making it back. Israel Corp certainly did, which is one reason why it reportedly replaced Better Place’s CEO.

Better Place still could make it. The company has raised another $100 million in two tranches, Better Place spokesperson Julie Mullins told me. So they have some breathing room to try to make the offer more attractive to Israelis car drivers . But this week’s news is a worrisome turn of events for them.

Fisker on life support

Then there’s electric car startup Fisker, which is searching for a lifeline — a.k.a a partner or acquirer — to help it produce its second car, the Atlantic. It’s also stopped assembling its Karma cars and says it’s waiting to see what will happen with its now bankrupt battery supplier A123 Systems.

Fisker told the Wall Street Journal this week that it has hired investment bank Evercore Partners to help it try to sell itself, or raise more money. The company that had been helping it raise funds previously, Advanced Equities, is being shut down for lying to investors about raising money for another cleantech company, Bloom Energy.

If Fisker is sold off, I speculate that the valuation would be pretty low. I heard the company’s last fund raising round was at a far lower valuation than its previous fundraisings. Fisker has raised funds from Kleiner Perkins, NEA, and others. Fisker launched back in the 2007. The company has had a lot of problems and some pretty bad luck, too.

Battery bankruptcy

And finally, there’s the high profile bankruptcy of lithium ion battery maker A123 Systems. This week the company held an auction to see if American battery maker Johnson Controls or Chinese auto parts giant Wanxiang would win bids for the automotive division. There could be a lot of controversy if Wanxiang bought the company, as A123 was given a large DOE grant, and also had military contracts.

A123 Systems had a long slow death over its years as a public company. Fisker was one of its major customers, ad when Fisker had to downgrade a quarter of orders, it hurt A123 hard. A123 also didn’t scale up its manufacturing very well, and had problems with some of its batteries — particularly faulty batteries that caused problems for Fisker.

Like the deadly combo of electric car maker Think, and battery maker Ener1 — which helped bring each other down — A123 and Fisker also have contributed to each others’ problems.

Tesla still going

One of the last really aggressive startup electric car bets left is Tesla. Yes, the company had to lower its estimates of production of its Model S this year, but now it’s on track with new numbers. And Tesla CEO Elon Musk tweeted recently that the company “was narrowly cash flow positive last week.” Musk can be a little creative, so wait for the next earnings report to check on that one.

In addition, Tesla also had some other good financial news this week. Investment management giant Blackrock has taken a 5 percent stake in the company, according to the Wall Street Journal and an SEC filing. Updated: That WSJ story was inaccurate and has since been corrected. Blackrock already had a stake in the company and reduced its share to just under 5 percent, selling some off.

So what’s the difference in these three struggling companies and Tesla? Well, for Tesla, strong leadership, strong technology, a little bit of luck and good investors. But I’ll go into that in another post, in a few weeks.

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As the Chronicle’s David Baker put it this weekend: cleantech’s future hinged on this election. Cleantech has become so politicized — despite that red states are growing more green jobs faster than blue states — that Tesla, Fisker, and of course Solyndra, creeped into almost all of the Presidential debates this election season.

Obama put an unprecedented billions into clean energy through the stimulus package, which has led to the development of solar and wind farms, and the incubation of new energy technologies through the ARPA-E program. Of course, not all the funds were spent well, and funding for now bankrupt Solyndra is now infamous.

Romney, on the other hand, used Obama’s green stimulus funds as an example of misspending, waste and cronyism and actively wanted to cut funding for things like a wind farm tax credit. In his election speeches he’s joked about global warming and the sea levels rising, and made statements about loving coal.

I’ve already gotten numerous press releases from companies and clean energy advocate groups hailing Obama’s victory as a major win for the industry. On Twitter the clean energy sector is also displaying its relief.

But it’s beyond just a victory — it’s a chance of survival for next-gen energy innovators and startups, which have had an extremely difficult past 18 months. Many of them will now at least continue to have an opportunity to compete on their merits. I said this during a talk at the NREL Forum last month, but I think cleantech will soon start turning a corner. With this news, it just has — the chief who clearly supports the development of these technologies, will be returning. Now we just need to get him talking about climate change, again.

Image courtesy of Seanmferese

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As part of the settlement, Advanced Equities sent letters to all investors in its funds Greentech III and Greentech IV — which raised money for Bloom Energy — explaining the charges and the settlement from the SEC and asking the investors if they want to sell their securities in the company. Between January and late March 2009, Advanced Equities raised around $122 million from about 609 individual investors in Greentech III and Greentech IV, according to the SEC settlement documents.

The letter, dated October 16 and titled “Re: Your Investment in Bloom Energy Corporation,” says:

Should you wish to sell your membership interests in Advanced Equities Greentech III, LLC, or Advanced Equities Greentech IV, we will use our best efforts to find a buyer to acquire such interests, at the cost you paid to acquire them.

Advanced Equities says in its settlement documents with the SEC that it promised to:

Deliver, within 30 days of the entry of this Order, by certified U.S. mail, a copy of the Commission’s Order in this matter to each customer of Advanced Equities who invested in Company A at any time between January 1, 2009 and December 31, 2010. . . . [And also] Use its best efforts to locate purchasers for any of its customers who purchased the securities of Company A through Greentech III or Greentech IV in 2009 and who wish to sell their securities at a price equivalent to their original purchase price. [Company A is Bloom Energy].

This letter could be a slight problem for Bloom because if a large chunk of these investors want to sell, and are expecting a certain price, it could add complications for Bloom’s overall fund raising. The company is very capital intensive and as of this summer was reported to be looking to raise another $150 million, which would bring its total funds raised to $800 million over its 11-year lifetime.

Bloom is in a major growth phase right now, meaning it needs more and more cash to deliver on its installations, particularly when it sells its Bloom boxes through its power purchase agreement model (meaning the customer doesn’t pay the upfront cost of the installation). The last thing Bloom needs is financing complications right now.

It’s also hard enough to raise money for greentech firms these days — venture firms are increasingly moving away from supporting greentech, and limited partners are even asking their investors not to use their funds for greentech. The SEC settlement around Bloom’s fund raise back in 2009 and 2010 just adds more suspicion for these investors.

At the same time, the valuation of the company this summer was reportedly $2.7 billion pre-money, which is considerably higher than the $1.45 billion pre-money valuation that Advanced Equities was selling it for back in early 2009. So the price itself might not be a huge concern.

However, SEC charges are never a great thing to be associated with any company when they need to raise money. Bloom Energy is one of the most capital intensive firms in greentech — rivaling fund raises by Solyndra and Fisker. And no doubt a lot of its investors have been hoping for an IPO soon.

The SEC charges were originally over statements made by Advanced Equities co-founder Dwight Badger, who said Bloom Energy had more deals and had hit more milestones than it actually had in 2009. Badger told investors that Bloom Energy had an order for “2,000 [units] from the CIA,” which would have generated $2 billion in revenue for the company. But in reality Bloom Energy didn’t have any orders from the CIA at that time.

The SEC settlement documents only refer to Bloom Energy as “Company A,” and says: “During 2009, Company A operated in “stealth mode” meaning that it provided scant information to the public about its finances, operations or technology.” This was the year before Bloom Energy emerged to the public — in February 2010, Bloom appeared on 60 Minutes, and held a huge launch event.

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The fund raising was managed by investment firm Advanced Equities, and Advanced Equities made close to $5.5 million in sales compensation off of the round, according to the filing. Advanced Equities, works with a lot of high net individuals, and has been raising money for quite a few capital-intensive greentech firms, including fuel cell maker Bloom Energy, green construction company Serious Energy and solar startup SolFocus. Fisker’s venture investors include Kleiner Perkins, NEA and others.

Advanced Equities last week was charged by the Security and Exchange Commission with misleading investors around a fund raise for a Valley alternative energy company back in 2009 and 2010 (reportedly Bloom Energy). Advanced Equities agreed to pay $1 million to settle the charges, without admitting guilt, and Advanced Equities co-founder Dwight Badger is no longer with the company.

The more money Fisker raises, the more some of these net worth individuals and investors will likely be diluted, and I’ve heard a rumor that the fund raising was at a significant down round. Chicago’s prepaid college saving’s fund, the Illinois Student Assistance Commission, said last week that it had invested $10 million into Fisker, and that it expects to lose more than half of that after the close of the fund raising. ISAC’s investment was valued at $14 million but is expected to lose about two-thirds of that value once Fisker finishes raising new equity, said ISAC.

Pensions and Investments, the media site that published the news of ISAC’s loss, writes: “ISAC spokesman John Samuels said “the fund backing Fisker had given ISAC the option of increasing its investment. But the agency opted not to, since it changed its investment policy in June to forbid future direct investments or co-investments in private companies, believing they are not appropriate for a public fund like College Illinois.”

Along with the fund raise, Fisker also had some bad news this week with a harshly negative review by Consumer Reports.

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Cars have a lot of moving parts, and car companies have to rely on their suppliers to make sure the parts supplied are not faulty. Fisker has recalled batteries from A123 Systems, and a faulty cooling fan from a partner. When a company is working with third parties to assemble the cars, then that adds another element of risk.

After a lot of delays, Coda officially drove its electric sedan off the assembly line at its plant in the Northern California city of Benicia, California, back in March, saying that the move was the start of its customer sales. Coda’s sedan has an official EPA rating for an 88-mile range (the distance its batteries can go on a single charge), and fuel mileage of 73 miles per gallon equivalent (77 in the city and 68 on the highway).

The Coda sedan has a base cost of $37,900 down from a previous price of $44,900 (before any state and federal subsidies). Coda also boosted the battery warranty on its car to 10 years (up from 8 years) or 100,000 miles late last year.

Coda has a joint venture with China battery maker Lishen, called Lio (oil spelled backward), and is in the process of raising $150 million in funding to help get these inaugural cars to the first customers in California. Other investors in Coda include Aeris Capital and Singapore-based EDB Investments.

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The Massachusetts company reported losses of $125 million, or $0.87 per share for the first quarter, compared with losses of $53.6 million, or $0.51 per share in a year-ago period. A123 generated $10.9 million in revenues, a 40 percent drop from $18.1 million in the first quarter of 2011.

A123 makes battery cells and packs primarily for electric cars and energy storage systems, and it competes with both startups and large, established lithium-ion battery makers, many of them in Japan and Korea. The company said Tuesday it has hired an outside adviser to figure out a new financial strategy, a move that has helped to boost its stock price by over 6 percent to $0.97 per share in recent trading. The company’s share price had previously fallen by 39 percent since late March, when it announced that it would start replacing battery packs with defective cells made at its Livonia, Mich., factory,

The company’s recent mistake has cost it dearly. The replacement program involved $51.6 million in warranty costs during the first quarter and another estimated $15.2 million for replacing defective batteries that were in its inventory, the company said last week.

The defective cells could cause battery packs to fail. In fact, the flaw led to a shut down of a Fisker electric Karma during testing by Consumer Reports, Bloomberg reported.  Back in December Fisker recalled 239 Karmas over faulty batteries made by A123 Systems. Fisker told Bloomberg that A123 was replacing battery packs that powered the Karma. A123 is a shareholder in Fisker.

A123 had to shut down production at its factory temporary and said it’s figured out the problem that caused the defective cells. The company built the factory in 2010 with a $249.1 million grant from the federal government. The company went public in 2009 to great fanfare, with its shares opening at $17 per share and closing at $20.29 per share on the first day of trading.

“We are gradually restarting production in a controlled manner consistent with our commitment to improve our manufacturing processes and quality, and have started shipping replacement products to impacted customers,” said David Vieau, A123’s CEO, in a statement Tuesday.

The battery maker said it expects to generate $145 million to $175 million in revenues in 2012, down from a previous forecast of $230 million to $300 million.

Photo courtesy of A123 Systems

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