Fisker + Chrysler = IPO

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

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

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

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

All in all, however, the Tesla story remains on track for near-certain success. Tesla will make and sell close to 20,000 Model S cars in 2013, reaching profitability. In early 2014, the Model X minivan comes online, adding another 10,000 to 15,000 cars per year. Then, in 2015 or 2016 at the latest, Tesla should launch its lower-cost platform, competing for cars near the $40,000 mark.

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


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

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

The problem with the $110,000 or so Karma is primarily that it hasn't sold very well. Only approximately 3,000 have been manufactured, and probably no more than 2,000 have been sold.

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

With all of these obstacles, one might wonder if Fisker would even have a chance to "make it" for the long term. Then, as Fisker was mentioned in the presidential debate, I finally saw that the answer was right in front of us. The data points are all available, and we need 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 early 2012, although this was deemed to be a temporary stop while Fisker sought a permanent CEO. Six months later, LaSorda was replaced by Tony Posawatz, who left General Motors ( GM) where he had been "Vehicle Line Manager" for the Chevrolet Volt since inception.

Posawatz is extremely highly regarded in the industry, principally for being one of the team leaders shepherding the iconic Volt to its position as the world's most successful electric car to date, with exceptional reliability. Tony's closest executive for the Volt program -- Frank Weber -- was picked off by BMW in April 2011 to lead BMW's development of three models that will compete with the Volt: The i3, the i8 and the recently announced Active Tourer.

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

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

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

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

C. That Fisker would be on a path to an IPO -- quickly, not as a pie-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 for investors to cough up at least $100 million in new funding. Media reports 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 the kind of extended-range hybrid cars that Fisker makes, as well as all-electric ones. A comprehensive list here would be too long, but here 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 (with many different degrees and variants), one company looks conspicuously absent: Chrysler (owned by Fiat).

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

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

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


The answer should be obvious. Chrysler's former CEO Tom LaSorda is on the board of Fisker. Fisker's CEO Tony Posawatz is highly respected by 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 it Chrysler, Dodge, Fiat, Fisker and even Jeep to sell around the world.

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

For the Fisker story to unfold, all you need to do is to connect the dots. 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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