Work Stops On Faraday Future’s Nevada EV Factory Over Non-Payment

NOV 14 2016 BY JAY COLE 45

Faraday Future's North Las Vegas site may only exist in the future as a rendering if finances are as dire as they appear

Faraday Future’s North Las Vegas site may only exist in the future as a rendering if finances are as dire as they appear

Remember the news from a few weeks ago that Faraday Future had not yet paid some $21 million it owed the general contractor building its Nevada electric vehicle factory?  Remember when Faraday then issued this statement?

Faraday Future's prototype electric car out doing some testing

Faraday Future’s prototype electric car out doing some testing (video)

“The business relationship between Faraday Future and AECOM is strong and we remain committed to building our factory of the future in North Las Vegas.”

Or how about when a Faraday spokesperson said that “no work stoppage would take place and that the automaker was working diligently with AECOM to resolve the overdue payment?”

As it turns out, not so much.

AECOM filed a letter of intent to stop work in compliance with a Nevada statute governing contractors, and Jalopnik is now reporting that indeed work has ceased.

The GC says that Faraday is now $57 million behind in payments to an escrow account that AECOM uses to pay other companies currently working on the factory.

The famous January 25th, Faraday Future "Bobcat Tweet Tweeted" - Signalling The Start Of Work On North Las Vegas Production Facility

The famous (and slightly comical) Faraday Future “Bobcat Tweet” – signalling the start of work on the company’s North Las Vegas production facility last January 25th

Truthfully, the news is not all that surprising as Faraday Future’s parent company LeEco had a confessional moment last week, saying it was deficient the required amount of cash to fund all of co-founder Jia Yueting’s many side projects.   Yueting sent a letter to employees on the financial situation, and also apologized to shareholders for not budgeting properly for all his venture’s cash needs.

Jia Yeuting with his "other" EV paroject - the LeEco LeSEE

Jia Yeuting with his “other” EV paroject – the LeEco LeSEE

Naturally AECOM still hopes for the best, and for the billion dollar Nevada project to again return to the black (especially as some ~$500 million of the build fund is earmarked to AECOM), sending Jalopnik the following public statement in regards to its private actions:

Faraday Future commenced work on its $1-billion state-of-the-art manufacturing facility in North Las Vegas earlier this year. To date, we have completed grading and foundation prep work.

At this time, Faraday Future is temporarily adjusting their construction schedule with plans to resume in early 2017. We remain fully committed to our client and our employees working on this project, and we look forward to the facility’s successful delivery.

“Temporarily adjusting their construction schedule” indeed.

Nevada Treasurer Dan Schwartz, an early critic of the $215 million tax package afforded Faraday last year (with the future promise of hiring 4,500 employess and generating $87 billion for the state over the first decade of operations), is not surprisingly, none too happy.

Reports the Las Vegas Review-Journal:

Bobcats!

Bobcats!

“We’ve expressed concerns from the beginning that Faraday didn’t have the funds to undertake or complete this project,” Mr. Schwartz said. “Within the last several weeks, our concerns remain unabated.”

The treasurer went on to use the word “fraud” and raise questions about a “Ponzi scheme.”

This past March, Nevada required a surety bond up to $75 million from Faraday, and for the comapany to deposit another $13 million into escrow accounts to cover engineering and preliminary construction of water, wastewater and rail facilities.  Which seems like a pretty smart move now in hindsight.

Also of interest, at least six senior execs at Faraday Future have already left the company over the past ~3 months (list via Jalopnik):

  • James Chen – General Counsel and VP Governmental Affairs
  • David Wisneiski – Finance Director
  • Syed Rahman – Operations Controller
  • Robert Filipovic – Head of Product Strategy
  • Stacy Morris – Head of Public Relations
  • Sarah Ashton – Associate Director Governmental Affairs

The one thing that is for sure now, is that Faraday Future’s plans to reveal its production-intent concept car this January at CES will certainly be done under a black cloud of doubt…if it even happens at all.


Update (Thursday, November 15th):  Help (in theory) could be coming as the cash-strapped parent of Faraday Future has announced some new funding.  Reports Reuters:  

“Leshi Holdings said on Tuesday it had secured commitments for $600 million to support its automotive unit and LeEco high-tech business, which has been grappling with a cash crunch.”

Whether or not that extends to Faraday Future in the US is unclear, one thing if sure, the entire $600 million would only get the company half a factory in Nevada.

Las Vegas Review-JournalJalopnik, Hat tip to John S!

Categories: Faraday Future

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45 Comments on "Work Stops On Faraday Future’s Nevada EV Factory Over Non-Payment"

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I hope this doesn’t leave a black-eye for all EVs. After all the stuff we’ve had to deal with, fires, Brodering, etc.. we don’t need a failure like this for anti-plugin crowd to jump on.

Thanks, for the Brodering tip, I was not that aware of its alleged significance or lack thereof.

I think enough people saw this coming that it really won’t be a big enough surprise to warrant a black eye. More of a “yup, thought so”

It’s still sad, the more involvement the better, but this one always felt more like a pipe dream than reality.

Jalopnik is reporting on it, which has a lot of non-EV readers. What if the AP picks up on it and people who have never heard of Faraday Future, just find out “yet another green-technology failure”? Then they will talk about Solyndra, etc..

Tesla was one of the companies funded during the Solyndra period. Most of the loans worked out, the government had a better success rate than many venture capitalists.

You’re preaching to the choir.

Well, most start-ups fail. What’s the failure rate; 90%? Is it even higher in the high-tech startup field, or is it only that such startups tend to get more media attention, and so their failures also get more attention?

At any rate, personally I don’t see this as a reflection on the EV manufacturing industry, or high-tech ventures in general. I see this as a reflection on the foolishness of spending much, much more effort on generating hype and vaporware than on creating and following a realistic business plan. And that’s assuming FF was not intentionally set up to be an investment scam, which may be giving the Chinese entrepreneur funding this more credit than he deserves.

There is no real business plan, self funded projects don’t think they need one.

So besides the test track, what has been built or completed? Pipes, roads, grading?

FF supposedly built an SUV prototype, altho it’s possible that’s just a conversion EV mule.

Headquarters here in Gardena, Ca. showing no significant signs of a slow down from the filled up and overflowing parking situation. This seems like 90 day work stoppage in Nevada at least. Beginning of a newly branded “Fraud-a-day Future”? Only Elon knows what his EV factory neighbor and potential competitor has in the works.

WTF?! How would he know that?!

As the person “in the field”, as it were, Drop Jay Cole a line if/when you see a slowdown at the factory… That will be the next red flag.

With >1000 employees, many of them high-paid former Big Auto or Silicon Valley execs, the salary costs have to be around $80M-$100M a year… No way the parent company can afford that unless the finances straighten out pronto.

Frankly, if I were a brand new company that imports parts from abroad, and I saw the results in the latest US election, I would re-think a US-centric company.

The chance of success goes down swiftly if we withdraw from trade agreements and trade wars and tariffs start happening.

It just doesn’t make sense to risk new business in that environment. The same way that large companies aren’t doing anything new in the UK until Brexit is resolved.

Exactly! Plus, is it not odd that the founder, who made his billions in a country that happens to also be quite supportive of EVs is not focusing on China first? Isn’t it a bigger potentiel market and cheaper to produce? Why isn’t someone seriously challenging BYD for instance?

BYD has BAIC hot on there heels right now for China EV sales and will have plenty more from established companies like BAIC a new China JV from VW that will be EV only ond several new China startups…
But the JV and the starups are a couple years away at this point…
FF is not dead yet but it is pretty silly of them and others to continue in the US since a new EV unfriendly administration is on the way…
Jia Yueting does not sound like he is willing to give up on any of his multiple starup ventures he has going on…

NextEV’s first car is for China first.

NextEV seems to have a much more realistic strategy.

China has more than 100 EV companies, they want to make that less than 10 by issuing permits, no permit you are out of business.

Rick asked:

“…is it not odd that the founder, who made his billions in a country that happens to also be quite supportive of EVs is not focusing on China first?”

One of many odd things about FF’s claims is that the company’s first press release claimed it was going to make EVs here in the USA to sell in China, but the idea of selling to the Chinese market was dropped in later PRs.

Not sure that qualifies as a red flag, but it certainly does suggest that the company’s initial business plan wasn’t very well worked out.

This company wasn’t really going to survival at all.

I think it was just to boost parent company’s stock. The schedule was way too aggressive and it costs a lot of cash to invest in a new car company.

Now, with this political environment, I think it will be hard to get more funding as well.

Yes, unfortunately this will be used by the green technology haters as an example why government shouldn’t choose winners or losers. Luckily this is only limited to the state of CA/NV which at least has Tesla as a shining example of success.

I am afraid that for the next four years, green technology companies will have a harder road to success. But whoever makes it thru will be the stronger and more successful in the long run. Survival of the fittest.

Called it like the dice were loaded.
Crapped Out!

lol +1

I weep at the thought of all those bobcats, sitting idle in a nice little row in the desert…..

Great! Now they will have money to put into their profitable Formula E endeavors :/

People dismiss formula E but even Sergio (spelled wrong) has stated that Ferari is eyeing joining formula E after 2018 when one car is run for the whole race instead of 2…

I’ve been calling them Faraday Farce for months. And that they are.

Yes, not really surprised here.
That’s what happens when it’s a vanity “side project” and you waste money on hiring a 1000 employees needlessly, showing silly concept cars in glitzy trade shows, and breaking ground on a huge factory before you even demonstrate an actual prototype.

All instead of simply hiring 50-80 good engineers in startup mode, focusing just on designing a good car and building prototypes.

Yes, hiring all those high-profile execs when they didn’t even have the shell of a factory built, was certainly a big red flag for those who know the signs of investment scams. All those executives means a great deal — likely most — of the investor money was going to pay the salaries of people who were not doing anything useful.

Unfortunately, this sort of investment scam (if that’s what FF is, which isn’t a certainty) is rarely if ever prosecuted. Those who run the company simply claim “Well, we thought we had a good idea, but unfortunately we spent all the investor money trying to make it work, and it didn’t.”

It happens all the time, and quite often it’s not even a scam. Often it’s the result of people who let their dreams override common sense and practical business plans. (Project) Better Place is a perfect example of that. I could see from the start that BP was going to fail spectacularly, but I really think the guy who promoted it had convinced himself (and others!) that it was possible. But then, BP didn’t waste money on salaries for high-profile execs with nothing to do.

Yes, FF isn’t necessarily a scam. I can’t be bothered to look forthe details, but IIRC most of the funding was the parent company’s, not 3d-party investors’, so they aren’t losing other people’s money. As for Better Place, I am very familiar with them and their plans (interviewed there when there 10 people on board, and later on knew people who worked there). While they didn’t hire expensive big names, they tried doing too many things at once. They founded subsidiaries in 5-6 locations instead of making sure they had working projects in 1-2 (Israel & Denmark would have been enough). Focusing too much on the big picture, they were spending money as if they were already profitable and not a startup. When the business model was finally unveiled in Israel, the cost of the service plans was about the same as doing the same mileage on an ICE car. Given the range issues (<<100mi car) and what-happens-afterward (the customer owned the car but not the battery, it was illegal and technically enforced (encryption) to charge the car from a household and nobody new what would happen on ownership transfer), of course they didn't get any mainstream customers – a… Read more »

Wavelet said:

“When the business model was finally unveiled in Israel, the cost of the service plans was about the same as doing the same mileage on an ICE car.”

Yes, and that’s why BP went bankrupt even sooner than I thought they would. The price for their monthly subscription was much higher than I expected; so high that it almost entirely wiped out the main economic advantage of BEVs: The lower cost for electricity vs. fuel.

No surprise here. What would really surprise me is if they made a production car.

We will always be looking into the future to see a car from these guys.

Oh, there’s a surprise. 🙄

And now, I’ll indulge myself in a big I told you so to all those who were castigating me for asserting that Faraway Faraday Future is at best a company with a shockingly clueless, absolutely unworkable business plan; and at worst an outright scam.

* * * * *

The article says:

“The [Nevada State] treasurer went on to use the word ‘fraud’ and raise questions about a ‘Ponzi scheme’.”

It appears that someone in a position to know more than I do agrees with my assessment, altho I think the term “Ponzi scheme” is misused here. FF shows all the indications of a high-tech startup investment fraud, not (so far as I know) a multi-level marketing fraud. I’ve noticed that in the last few years the term “Ponzi scheme” being applied to investment scams in general, which is a much broader category than what the term originally indicated.

You are not in the clear yet. It will most likely take at least a year or two before we know where this is really headed.

The probability of success is still very low, as any startup and even more so when it comes to car manufacturing startups.

So just get the popcorns and watch out for the production prototype. It will be interesting to see if they can manage that one in time for CES and if it’s production intent as it is. I’m also looking forward to see their take on in-hub motors (which seem to be their “re-invent the wheel” thingy).

Worst case scenario you are wrong and we get another company delivering EVs. It’s a win-win for your crying wolf…or scam… position.

I’m still in the “hubris but manageable hubris by a man who wants to help change the world”-camp.

This is at least more fun than watching Tesla a few years back in a similar position, that was only nerve wrecking. Then it was more about the make or break of the whole EV industry and failure would have been devastating.

I told you it’s smells like scam.
Copying Elon isn’t working.
Come back later with fresh ideas guys.

Is there really a Faraday Future? Does somebody really run this company? As compared to Elon Musk and Tesla, Elon is in the news, tweeting, making headlines. We see him and can connect him to an actual company. But this other company seems to be out there but not really. So ethereal.

Stop complaining we love con men…our next POTUS is a genuine con-man.

Trump has succeeded so far beyond the achievements of any previous con-man that he makes P.T. Barnum look like a kid trying to imitate a carnival sideshow barker.

P.T. Barnum was more an impresario, than a con man. You at least got something for your money. He put on shows that stretched the credibility of their promise, but con men take your money and give you nothing in return.
This way to the Egress!

…so you are saying he should be tarred and feathered and ridden out of town on a rail?
Genuine as opposed to a fake con-man.
Good one.

I hope there’s been no work stoppage or funding problem for the Formula E team.

Looks like more financing has arrived, and just in the nick of time:

China’s Leshi Holdings secures $600 million in support
http://mobile.reuters.com/article/idUSKBN13A10K

It appears we have someone at the helm who, when it comes to both schedule and spending, is even more ambitious and aggressive than Elon Musk. I’ll make the popcorn.

The lights have come up, the floor is a sticky gooey mess, everyone is leaving but you want to stay and watch the credits roll.
It’s sad, but funny too.

We have not reached the actual movie yet. It’s still the commercials and movie intro running at the theater.

Bring out the popcorns… 🙂

Dang… I feel bad for Peter Savagian. I hope he’s doing ok.