Faraday Future fires dozens of employees on unpaid leave

Recently announced investments apparently aren’t enough to get things back up and running.

Photo: Faraday Future

Sputtering electric vehicle startup Faraday Future has fired dozens of employees who have been on unpaid leave for months, including manufacturing workers hired to staff the company’s factory in Hanford, California, The Verge has learned. The workers received benefits during this furlough, which started in late 2018, and it had already been extended once already. But the newly-fired employees will see those benefits expire on June 30th, according to termination paperwork provided by a former employee who was granted anonymity due to a nondisclosure agreement with the company.

In addition, Jeff Risher, Faraday Future’s vice president of product, technology, and IP strategy, left the company earlier this year, The Verge has learned. Risher came to Faraday Future from Tesla, where he served as deputy general counsel and chief IP counsel for two years. Risher also spent nearly a decade at Apple. He did not immediately respond to a request for comment.

John Schilling, Faraday Future’s spokesperson, confirmed the cuts and Risher’s departure in an email to The Verge. “Most” of the hundreds of workers who were on furlough had already “left on their own,” Schilling said, but the company made new cuts over the last few days. He said some workers still remain on furlough, but wouldn’t say how many. “I cannot share the exact number of furloughed workers we let go nor their roles at this time but the company still retains over 350 active workers in the US,” he wrote. Faraday Future had employed around 1,000 workers in the US in the middle of 2018.

The new cuts come after the startup made two splashy but quizzical funding announcements earlier this year. In March, the would-be California automaker announced a joint venture agreement with Chinese mobile gaming company The9 to make EVs in China, with the latter claiming it would contribute up to $600 million to the project. And in April, Faraday Future announced it had signed on an investor willing to put up to $225 million into its stalled US operations.

Both of those deals came with caveats, though, as The Verge previously reported. The Chinese gaming company only had a market capitalization of about $100 million at the time of the announcement. It also doesn’t have to deliver the first $200 million installment for a few months, according to the terms of the deal. Even then, the money from The9 will mostly go to the new joint venture in China.

The other investment Faraday Future recently announced came in the form of bridge financing (or a short-term loan) from Chicago firm Birch Lake Associates, which is known for dealing with restructurings and bankruptcies. And while Faraday Future touted the deal’s ceiling of $225 million, the startup has likely only received a fraction of that so far. The first installment the company recently said it received from Birch Lake is worth just $15 million, according to a previously unreported deed filed with the Los Angeles County recorder’s office.

It’s not clear how much Faraday Future has received so far from either of these deals, but some of the money is likely being used to pay off the company’s debts. While the startup had been hit with 11 new lawsuits from suppliers and contractors between October 2018 and February 2019, four of those are now in the process of being settled, three are in the process of being dismissed, and one has been moved to arbitration, according to Los Angeles County Superior Court records.

That said, Faraday Future’s debts have also ballooned in recent months. The startup’s chief financial officer claimed suppliers and contractors were owed “more than $59 million” at the end of September 2018, according to court documents uncovered by The Verge. But the company recently told Fresno’sBusiness Journal that it now owes closer to $160 million. Faraday Future executives have also said internally that the company needs at least $500 million to get its first car, the FF91 luxury SUV, into production.

Faraday Future found itself in this most recent financial ditch after it spent most of 2018 fighting with Chinese real estate conglomerate Evergrande, which saved the startup from bankruptcy. Evergrande pledged $2 billion to Faraday Future in exchange for a 45 percent stake in the startup at the end of 2017. But Faraday Future founder and CEO Jia Yueting spent the first $800 million installment ahead of schedule. Evergrande agreed to advance some of the remaining balance of the investment, but only if Jia relinquished control of the company.

The two sides then spent months fighting with each other, and in the meantime Faraday Future nearly ran out of money again. The startup laid off workers near the end of October and cut salaries across the board to stay afloat. One of the two remaining co-founders resigned, along with a number of other key executives. Faraday Future then placed hundreds of workers on unpaid leave, and expanded that furlough in December to include hundreds more.

Faraday Future and Evergrande eventually called a truce on the last day of 2018. Evergrande reduced its stake in the company to 32 percent and allowed Faraday Future to find new investors. As it searched for backers, Faraday Future sold its headquarters to free up some short-term cash, and put the land it owns in Nevada — where the company once planned to build a $1 billion factory — up for sale, too. That land, though, is now being held by Birch Lake as collateral.

Source: Sean O'Kane|@sokane1 (The Verge).
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