Things are not going well for Fisker Automotive, the electric-car startup being launched in Los Angeles by former BMW designer Henrik Fisker.
Fisker is being financed in large part by $529 million in loans from the U.S. Department of Energy, and many of those funds have been frozen because the venture is not meeting its timetable of project milestones.
The temptation here is to say the problem is with electric vehicles. Critics are already saying it -- that the U.S. government was wrong to provide seed money to encourage the industry to embrace EVs. Critics believe that EV technology is unrealistic in the free market, and companies like Fisker are a waste of time and money.
But whether their point is valid, it isn't really the true problem at Fisker.
Fisker's setback is basic Auto Industry 101: money.
It simply takes an ocean of capital to enter the car business. Endless streams of money. And that's why no one "goes into" the auto industry. It is what economists call a "barrier to entry." I.e., anybody who has that kind of money probably doesn't want to gamble it away at the automotive poker table.
Consider just one of the tasks that Fisker is undertaking. He is retooling the former General Motors assembly plant in Wilmington, Delaware, to produce a new mid-sized sedan called Project Nina.
Never mind what factory retoolings normally cost -- just consider the depth of overhead and resources needed to undertake an ordinary factory retooling. GM or Ford or Honda or Fiat can reach into vast warehouses of some of the brightest engineers in the world to resolve technical glitches with electrical wiring or metal stamping. They have networks of people who can answer questions on coatings, solve problems on robotics and improve the specs on a troublesome component.
How many people truly participate in the retooling of an auto plant? Is it the 100 or so contractors that Fisker has had on site in Wilmington in recent months? Or the thousands of high-paid technical support people on GM's payroll who would be on call if Wilmington were still a GM project?
How many paychecks a month is that? How many health care and retirement plans? How many expensive proprietary software programs rolling through how many computer terminals in how many cubicles on how many floors of how many buildings are required?
An auto project inhales cash. Cash is what enables projects to stay on time.
Fisker's project isn't off schedule because the future of EVs is sketchy. It's behind schedule because there aren't enough people on hand. And only more money will correct that.