Faraday Future is Once Again in Trouble as it runs low on cash.
More bad news for Faraday Future as the company announced on Twitter yesterday that they plan to furlough hundreds of employees as a result of an ongoing cash shortage.
This follows hundreds of other employees placed on furlough back in October reducing employees from 1000 to 600. After the announcement yesterday the company is expected to go from 600 down to 350 employees.
The leading cause for these cuts has to do with an ongoing arbitration case against one of Faraday Futures largest financial backers, the Chinese real estate giant Evergrande.
Last year Faraday Future was on its death bed, but with a 2 Billion Dollar investment agreement from Evergrande, they were able to make it through the year, but the money might not have worked out as well as they would have hoped.
Evergrande initially gave Faraday Future 800 Million Dollars up front and agreed to provide the addition 1.2 Billion over 2019 and 2020. This investment didn't come cheap though Evergrande received a 45% state in Faraday Future along with all the startup's assets and intellectual property.
This was a massive deal for Faraday Future. They essentially handed over the company to keep it alive, the only thing they kept was a controlling stake, though that didn't last long.
Flash forward to July 2018 and Faraday Future had spent all of the 800 Million which was suppose to support it until the end of the year. Not only that but they would need an additional 600 Million more to bring their electric SUV to market.
This turned the relationship between Faraday Future and Evergrande sour over the summer months. Evergrande agreed to provide 700 Million Dollars of additional funding earmarked for 2019 in exchange for two critical conditions.
The first condition, CEO and co-founder Jia Yueting had to step away from his director roles at any offshore companies affiliated with Faraday Future. The main reason for this was because Jia was on the national debtor blacklist in China. This makes it very difficult for Faraday Future to secure additional funding in the future from other Chinese companies.
The second condition, Jia had to turn over his controlling stake in the company to a neutral third party. This would mean Evergrande would now have the controlling interest in Faraday Future and the final piece to do as they please with the electric car startup.
This didn't sit well with Faraday Future and resulted in the company and Evergrande in an arbitration case against each other. This means until the case is settled no money is being provided to Faraday, and they need to take some drastic action to keep the company alive for the short term.
At the beginning of September 2018, its rumoured Faraday Future only had 18 million dollars in the bank to keep the company running. With an upcoming December 15th payday for 600 employees, the company was seeing red.
The only way to solve this was to reduce the workforce until more funding could be secured. Currently, employees are not expected to retire to work until February or March of 2019.
As for the production of the FF91, Faraday Futures first all-electric SUV, it appears this is yet another setback in what was once considered a Tesla killer.
Though now Faraday Future should worry less about killing their competitors, and more about not being killed themselves.
Faraday Future came into the world as a mystery company. Once thought to be owned by Apple, or maybe one of the big Car companies in the USA but soon after their first car announcement excitement around the company started to fall.
The FF91 introduction event at CES in 2016 was rather strange, and rumours surrounding the pre-orders were sad to say the least, with only a few thousand pre-orders made.
In the end, I find it hard to believe Faraday Future will ever bring a car to market and even if they do, would people be interested in also buying it.
Tesla has a huge lead in the electric car market not to mention the traditional car manufacturers are ramping up their electric car projects.
If Faraday Future ever does get a car to market, it's going to be too little too late.