Faraday’s Future At Risk From Parent Company LeEco’s Cash Deficiency? (video)

6 months ago by Mark Kane 22

Bad news comes from China, where the LeEco group notes a deficiency of cash due to over-investment in various projects, possibly threatened a couple of EV start-ups in the future.

Chinese billionaire and Chairman/co-founder of LeEco,  Jia Yueting, sent a letter to employees on the financial situation and apologized to shareholders for not budgeting properly for his various venture’s cash needs.

LeEco LeSEE

LeEco LeSEE

LeEco earlier this year unveiled an electric car concept, and announced a plan to build $2 billion factory in China.

The company managed to secure over $1 billion for EV developments, but autonomous drive technology is still in its infancy, while related company Faraday Future has recently noted some delayed payments for its Nevada factory project and has been subject of several financing concerns in the past.

“In a lengthy letter to employees, company co-founder Jia Yueting apologized to shareholders and pledged to slash his income to 1 yuan (15 cents), slow LeEco’s madcap pace of expansion, and move the company toward a more moderate phase of growth.

LeEco is the umbrella holding company for a sprawling family of businesses that includes sports media, automobiles, smartphones and TVs. The company known for its LeTV streaming service has aggressively pursued funding and placed bets on new ventures, from an electric car plant in Nevada to a $2 billion acquisition of California TV maker Vizio Inc.”

LeEco LeSEE

Jia Yeuting with the LeEco LeSEE

LeEco simply isn’t able to raise enough cash or generate it from Leshi – apparently the only profitable entity in the group.

Here is some citations from the letter:

Could head count and project status at Faraday Future also be heading for some trimming?

Could head count and project status at Faraday Future also be heading for some trimming?

“No company has had such an experience, a simultaneous time in ice and fire,”

“We blindly sped ahead, and our cash demand ballooned. We got over-extended in our global strategy. At the same time, our capital and resources were in fact limited.”

“Our fundraising ability isn’t strong,” “The scale of our external fundraising had trouble satisfying the demands of our rapid expansion.”

Apparently, some “trimming the lowest 10% of employees” and reducing subsidies on its smart TV and smart phone business will aid in getting the company back on the right foot.

However, it is not hard to imagine if this plan isn’t effective enough, larger capital-intense projects (like perhaps building electric cars) may have to be scaled back.

source: Bloomberg

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22 responses to "Faraday’s Future At Risk From Parent Company LeEco’s Cash Deficiency? (video)"

  1. Big Solar says:

    Yikes.

    1. jimijonjack says:

      This thing smelled fishy right from the very beginning . nothing has changed & nothing will change . I hope they don’t go totally out , it sure doesn’t look Good AT ALL !

  2. William says:

    The headquarters here in Gardena, Ca. are showing no signs yet, of a slowdown. Things may be on hold for a bit, until Chinese regulators are able to process the thumbs up paperwork. This holding pattern shouldn’t take long to sort out, as there are a lot of Capitol Expenditures already at stake.

  3. Michael Will says:

    Good news for tesla, can buy another factory for cheap

  4. jimijonjack says:

    That’s what happens to people who have a little success that gets to their head ,and now they think that they can do anything without THINKING!

    1. Mikael says:

      If you consider going from owning nothing and working at a call center to having multiple companies with revenues over $5 billion and a personal wealth of over $6 billion “a little success” then I wonder what big success is to you.

      Elon Musk would smack you for saying what he has done “a little success” since he is at about the same level.

      1. jimijonjack says:

        I am not talking about Elon Musk !

        1. Mikael says:

          No, you are talking about a man who has been almost exactly as successful with his companies as Elon Musk and who has taken a similar path in life.

          So if you call this “a little success” then you are saying the same about Elon Musk. Now stop making yourself look like a fool.

          1. Yogurt says:

            + 1
            It is amazing how quick EV people are to bad mouth someone who is out trying to make EVs with his own money…
            Making cars is hard enough that Google and Apple have aparently decided against producing full autos…
            Those Nevada tax subsudies are performance driven like Teslas Nevada tax subsudies…
            This guy deserves a whole lot of credit even if he fails since arm chair warriors have never acomplished anything…

  5. pjwood1 says:

    Forget autonomous. Just deliver a compelling electric, maybe with adaptive cruise, a functioning ibrowser and steering wheel that doesn’t hum.

    1. floydboy says:

      Huh??

      1. pjwood1 says:

        Trying to point out there’s room for competition in all-electric vehicles, without so high a bar as FF may expect they need to set for their car’s tech. Perhaps Rimac understands this?

        Part of Musk’s savvy was having a better tech portfolio, despite things like today’s news that OPEC does not expect oil prices to climb beyond $60 before 2020. He’s given Tesla a good non-electric market defense, for the benefit of the tech buyer.

        Because I’m no longer typing on a certain 17″ screen, in stopped traffic, I’ll go on. Musk makes his cars distinctive, in ways that have nothing to do with electric drive, and while maybe most of his customers like that, make no mistake many do not. Whether hearing first hand from OA’s that the suspension is keeping some luxury buyers away, his refusal to multi-valve (soften) shocks, refusal to add more ergonomic buttons, to add drive modes, cool the case(s), speed up the browser, or just be friendlier to those enjoying the task of driving, Musk appears ready to let go of a lot of customers. Rather than smell coffee, he hides icons with V8, increasing the effort of drivers who’d rather watch the road. He “updates” things that make his cars better, and worse. Will V8 AP1.0 cars ever be as good as V7 AP1.0, or will the ping-ponging within lane markings, that V8 introduced into Autopilot, not go away as an incentive to eventually go out and get an Autopilot 2.0 car??? -That last thing is what people accuse Apple of doing. So far, with Tesla its subtle, if anything.

        Making a better EV, if subjective, is something someone else should have no trouble pulling off. Tesla cultists say tom-ah-toe, I say tom-ay-toe. There’s lots of room.

  6. Mister G says:

    The CEO needs to cough up billions of dollars and finance the project.

    1. floydboy says:

      Either that or get it from the other end! “BILLIONS and BILLIONS”.😉

  7. JAMEs says:

    This company has never seemed right. Looks like a lot of LinkedIn pages are about to get a freshening up.

  8. ffbj says:

    The samurai are starving yet they are still using toothpicks.

  9. Making America Great says:

    Another shinny chinese nickel rotten to the core inside.

  10. Yogurt says:

    I was foolish enough to think a self made billionair would have more finincial common sense…

    Spending 2 billion to buy a Vizio while trying to start two auto companies?
    Maybe Faraday and LeEco auto will get rolled into one?
    Time is not on the side of any electric auto company start up as legacy auto companies will realize at some point that they must go all in…

  11. Steve says:

    Goodness me, when it’s not outside detractors, but the people inside the company saying this stuff… things are bad.

    They should change the name of the car division to Far Away Future.

  12. Four Electrics says:

    I am reminded of the days when Elon was planning to sell Tesla, which was out of cash, to Google. Still, there’s a difference between not having any cash to begin with and not having financial controls on the profitable businesses you do have, which is the case here. I wonder if FF will tap the American public markets this year.

  13. Mikael says:

    What’s with all the very negative comments? Expanding faster than your cash flow allows is a very common problem with fast growing companies.

    The only real problem here is that the need to slow down pace, LeEco doubled the revenues between 2014 and 2015, that pace of growth is not sustainable for multi-billion companies.
    The other option except slowing down is to get cash infusions, like Tesla has been doing over and over again while “only” growing at a 40-60% rate during the last three-four years.

    In Q1 2016 they actually reached a 126%(!) year on year revenue increase.

    LeEco is going super strong so this should as most be a little speed bump for Faraday Future.
    Now let’s wait and see for the production prototype vehicle at CES in January.

    1. Yogurt says:

      Its simply the unfortunate moderen American culture that we spread through out the world through the cancer called hollowood…