Fisker + Chrysler = IPO

NEW YORK (TheStreet) -- Tesla (TSLA) and Fisker received some unexpected attention in lastWednesday's presidential debate. There are some important differencesbetween these two companies, however. This article outlines my theoryof what will happen to Fisker in the coming months and years.

But first, Tesla. The Tesla story is simple in comparison, in thatthere is hardly any doubt about how this company will progress for thenext several years, short of an M&A event.

Tesla has over 12,000 refundable $5,000 (and up) reservations for itshatchback, the Model S. Prices range from $57,400 to just over$100,000. Tesla has delivered approximately 300 cars since productionstarted in June, making for a much slower ramp that it expected whenit started.

Unfortunately for Tesla, the calendar year break comes in theearly/middle phase of its ramp to 20,000 cars per year. Instead ofreaching "cruising altitude" by Thanksgiving, this now looks to happenby February, barring further production issues.

All in all, however, the Tesla story remains on track for near-certainsuccess. Tesla will make and sell close to 20,000 Model S cars in2013, reaching profitability. In early 2014, the Model X minivancomes online, adding another 10,000 to 15,000 cars per year. Then, in2015 or 2016 at the latest, Tesla should launch its lower-costplatform, competing for cars near the $40,000 mark.

All the while, Tesla's investors Mercedes and Toyota ( TM) are or have beengenerating extra high-margin revenue for a couple of their new cars.Much of Tesla's enterprise value comes from its patents and other IPassociated with its focus on its signature drivetrain technology.Then add the unique sales (stores) model, which has largely appliedthe Apple ( AAPL) model to the automotive industry.


So basically, Tesla is all set. But what about Fisker, which waslumped into Tesla in last week's presidential debate mention?

Fisker remains privately held, with Kleiner Perkins being one of thelead investors. The spectacularly beautiful Karma car is the closestthing to a four-door Ferrari. Close competitors include the Aston MartinRapide and Porsche Panamera.

The problem with the $110,000 or so Karma is primarily that it hasn'tsold very well. Only approximately 3,000 have been manufactured, andprobably no more than 2,000 have been sold.

In April, Fisker showed a slightly smaller and significantlycost-reduced model that should sell for perhaps close to $55,000. Itwould be called the Atlantic, and be manufactured in Fisker's Delawarefactory. The problem here is that Fisker has been short on cash,especially since it's estimated Fisker would need $130 million to $150 million tofinish the development of the Atlantic. As things go with automotivedevelopment, it would probably take over two years to wrap up thisdevelopment.

With all of these obstacles, one might wonder if Fisker would evenhave a chance to "make it" for the long term. Then, as Fisker wasmentioned in the presidential debate, I finally saw that the answerwas right in front of us. The data points are all available, and weneed only to connect the dots. Let's take them in turn:

1. Fisker just got a new high-profile CEO.

Former Chrysler CEO Tom LaSorda replaced Henrik Fisker as CEO in early2012, although this was deemed to be a temporary stop while Fiskersought a permanent CEO. Six months later, LaSorda was replaced byTony Posawatz, who left General Motors ( GM) where he had been "Vehicle LineManager" for the Chevrolet Volt since inception.

Posawatz is extremely highly regarded in the industry, principally forbeing one of the team leaders shepherding the iconic Volt to itsposition as the world's most successful electric car to date, withexceptional reliability. Tony's closest executive for the Voltprogram -- Frank Weber -- was picked off by BMW in April 2011 to leadBMW's development of three models that will compete with the Volt: Thei3, the i8 and the recently announced Active Tourer.

Thickening the plot, BMW will also deliver a key component -- thefour-cylinder generator gasoline engine -- for the Fisker Atlantic. BMWis also the place where -- you guessed it -- Henrik Fisker cut histeeth in the 1990s.

A man such as Posawatz would not leave his successful job at GM for arelatively tiny startup seemingly on the ropes unless three factorswere in place:

A. That Fisker, just like Tesla did, would team up with a major carmaker to manage its electric car program.

B. That Fisker would obtain the necessary funding to develop at leastone new car.

C. That Fisker would be on a path to an IPO -- quickly, not as apie-in-the-sky hope.

2. Fisker just got a new round of funding!

It looks like Fisker's new CEO gave the company enough credibility forinvestors to cough up at least $100 million in new funding. Mediareports suggest Fisker obtained just that, a little over a week ago.

3. Would Fisker team with Fiat/Chrysler to develop new cars?

Most major car makers have announced internal developments for thekind of extended-range hybrid cars that Fisker makes, as well asall-electric ones. A comprehensive list here would be too long, buthere are some examples:
  • GM: The Volt, the upcoming Spark and Cadillac ELR
  • Ford: The C-Max Energi, Fusion Energi and Focus Electric
  • Honda: The Accord plug-in hybrid and the Fit Electric
  • Toyota: The Prius plug-in and RAV4 Electric
  • BMW: The i3, the i8 and Active Tourer
  • Mercedes: The Smart Electric, B-Class Electric and SLS Electric
  • Nissan: The LEAF, Infiniti LE and a few vans
  • Mitsubishi: The MiEV and the Outlander Electric
  • Volvo: A couple of models...
  • VW/Audi/Porsche: Numerous models starting with the VW e-Up
  • Land Rover: The new Range Rover in a plug-in hybrid version

With all the carmakers developing a Fisker-style drivetrain (withmany different degrees and variants), one company looks conspicuouslyabsent: Chrysler (owned by Fiat).

Fiat CEO Sergio Marchionne announced that the upcoming Fiat 500Electric would be made for California only, and that they "would losemoney on every one." Some carmakers sell a handful (up to 2,600) ofelectric cars in California strictly to satisfy a hopelesslyburdensome bureaucratic state nightmare, which in turns allows them tosell many (regular) cars in California.

In the case of Toyota, it outsourced much of this work to Tesla, whichhelped it develop the RAV4 EV, which just went on sale two weeks agoin California. Toyota is willing to lose probably tens of thousandsof dollars per car just to satisfy the bureaucrats in Sacramento, sothat it can sell more profitable large cars and trucks.

Fiat's de-facto U.S. subsidiary, Chrysler, was developing a handful ofplug-in electric and hybrid cars, but it was reported that theseprograms were recently cancelled.


The answer should be obvious. Chrysler's former CEO Tom LaSorda is onthe board of Fisker. Fisker's CEO Tony Posawatz is highly respectedby Chrysler.

Together, Chrysler could invest some money -- $30 million to $50 million -- in Fisker and help co-develop the Atlantic (or some other car) and then brand itChrysler, Dodge, Fiat, Fisker and even Jeep to sell around the world.

On the backs of such a development announcement, Fisker could thenannounce the filing of an IPO. With the first $100 million in thebank, another $30m-$50m from Chrysler/Fiat wouldn't be far away, andfollowed by an IPO.

For the Fisker story to unfold, all you need to do is to connect thedots. Of course this is pure speculation, but it seems logical to me.

At the time of publication, the author was long AAPL.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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