From the moment EV startup Faraday Future announced drastic layoffs and pay cuts last October, another new challenge emerged: 11 new lawsuits filed against the company by suppliers and contractors, almost all of them previously unreported. In total, the companies are seeking nearly $ 80 million in payments due, damages, and fees from Faraday Future.
All lawsuits allege that Faraday Future toughened up these companies shortly after signing contracts with them. It’s a claim that’s been made about Faraday Future in the past, such as when about $ 100 million in unpaid bills were allegedly owed during a previous financial crisis in 2017. But seen together, the new lawsuits provide unprecedented clarity about how much you owe. currently the startup. and to whom Faraday Future CFO Michael Agosta admitted in court documents last year that the new company owed suppliers “more than $ 59 million” as of October 2018. The new lawsuits suggest that the total number now it could be much bigger. (A representative for Faraday Future did not respond to a request for comment in time for publication.)
In total, the lawsuits are asking for nearly $ 80 million in damages and fees.
The lawsuits also come at a time when the California company is almost out of cash. An ugly and public fight in late 2018 with its main financial backer, Chinese real estate conglomerate Evergrande, has left Faraday Future on the brink once again. While a truce was being called, hundreds of employees who had been placed on unpaid leave in December were informed this week that the company does not have enough money to bring them back. Faraday Future is having trouble finding another investor to back its efforts, and in the meantime, some crucial employees, including the team behind the company’s electric powertrain, have jumped on rival EV company Rivian.
The largest lawsuit of the 11 filed since last October comes from the Illinois subsidiary of major German auto contractor Eisenmann Corporation. Faraday Future hired Eisenmann in May 2016 to build one of the most expensive and critical sections of its planned $ 1 billion factory in the Nevada desert: the paint shop. Faraday Future initially agreed to pay about $ 230 million for the paint shop and $ 11 million for a second, smaller paint shop, according to the lawsuit, which was filed on December 21, 2018.
But the startup only paid Eisenmann $ 32 million before the plans for the giant factory were delayed, and eventually canceled, in July 2017. Eisenmann claims that Faraday Future never paid the agreed-upon cancellation fee, and that the EV startup now owes no less than ”$ 74,566,206, depending on the contract language.
On December 20 of this year, California-based marketing agency The Visionary Group also sued Faraday Future for breach of contract, as first reported. The edge. The agency was hired by Faraday Future in June 2018 to host a last minute event at the Pebble Beach Concours d’Elegance car show, which took place in August 2018. But Faraday Future’s fight with major investor Evergrande began to climb at the same time. which meant the startup was running out of money as a result. (Faraday Future only had $ 18 million in the bank as of September, according to testimony from its CFO.) Faraday Future finally withdrew just 12 days before the event. The Visionary Group is seeking $ 1.9 million in damages and fees.
Staffing agencies, vendors, event planners and design firms say Faraday Future has gone rigid.
Multiple companies hired by Faraday Future to locate employees or provide equipment were also among those who sued the EV startup for unpaid bills. Total Western Inc., a California contractor that provided construction and maintenance services to Faraday Future in 2018 at its Los Angeles headquarters and at the Hanford factory, says it is owed approximately $ 1 million. Robert Half Executive Search claims in its own lawsuit, filed in December 2018, that Faraday Future hired the staffing firm in December 2017 to help find a CFO and treasurer. The EV startup never paid the $ 196,332 the companies agreed to, according to the lawsuit.
IT staffing company Tentek placed 13 employees at Faraday Future after March 2018, according to its own lawsuit filed against EV startup on October 24 of last year. But Faraday Future still owes him at least $ 200,000, and Tentek is seeking $ 281,194 in damages and charges, according to the recruiting agency. Century Group Professionals says in its own lawsuit filed Nov. 5 that it placed four employees but was never paid for that work. You are seeking $ 76,614 in damages.
The list goes on. Global design firm Edenspiekerman was hired in February 2018 to update the user interface and user experience on Faraday Future vehicles, but never received payment, according to a lawsuit filed on October 31 last year. The company is seeking $ 542,302 in payments due and fees.
Faraday Future also allegedly did not pay for basic office and technical work. Software company Lighthouse was hired in February 2018 to provide services such as “consulting, data collection, forensics,” and more, according to a lawsuit filed on November 14 of last year. Faraday Future “paid nothing,” says Lighthouse. The company is seeking damages of $ 297,848 plus interest. Computing components company Arrow Electronics says in a lawsuit filed on November 26 of last year that Faraday Future owes it $ 84,943, while broadband company Fireline claimed in a lawsuit filed on October 19 that it is still owed $ 84,943. $ 24,151 from his job since 2016.
Even with Vending One, the California company Faraday Future hired to fill its headquarters with vending machines after its infamously catered lunches started to cost too much, says the EV startup still owes it $ 12,469 in a lawsuit filed. December 14.
At the same time, Faraday Future continues to bleed employees, including some who were key to the company’s success. In fact, three of them have jumped from the ship to a rival. Silva Hiti, a General Motors veteran who worked on the company’s first production electric car, the EV1, left Faraday Future for Rivian’s EV EVian company in January, according to his LinkedIn account. Young Doo and Steven Schulz, who were also members of the EV1 team, also took on roles at Rivian, according to LinkedIn.
The team of EV whizzes contracted by GM in 2016 no longer exists.
Losing talents like Hiti and their EV1 co-workers will make it hard to move forward, even if Faraday Future finds new investors, former employees say The edge Along with Peter Savagian, who resigned from Faraday Future in October 2018 the same week the company lost co-founder Nick Sampson, they were part of a core group that helped build the most critical components of FF91. Her hiring in 2016 also helped Faraday Future establish some of the legitimacy that fueled her profile from the start.
Additionally, Lewis Liu, who was Faraday Future’s director of strategic partnerships and business development since 2016, recently left the company to join Karma Automotive. Mercedes-Benz veteran Stanley Chapman, who ran the Faraday Future manufacturing facility in Hanford, California, also left the startup in January and returned to the German automaker according to his LinkedIn profile. (Liu, Doo and Schulz could not be reached for comment. Hiti and Chapman declined to comment.)
Retaining talent is a problem, but Faraday Future will also need a lot of money if it ever wants to build its luxurious SUV, the FF91. Agosta, the CFO, said in court documents released last November that Faraday Future would need at least $ 116 million to start production. But another executive told employees at a meeting in December that he needs about $ 500 million.
Desperate for cash, Faraday Future is trying to sell the land he still owns in Las Vegas
Since then, Faraday Future has struggled to align funds, even after reaching the truce with Evergrande in late 2018. The company says it is in “serious talks with potential investors to increase both asset-based debt financing and investment. equity financing, “although two people familiar with the company’s finances say it is struggling to close a deal because CEO and founder Jia Yueting refuses to give up any control.
One remaining lifeline for the company is the land in Las Vegas where it planned to build the $ 1 billion factory. Faraday Future has remained in that land throughout the turmoil of the past two years, and may have found a buyer, according to documents obtained by The edge: New York City Hedge Fund, Stonehill Capital Management.
A lien filed Dec. 31 at the Clark County Recorder’s office in Las Vegas shows that Stonehill is currently conducting due diligence on the 920 acres that Faraday Future owns there, although a sale has not been achieved. If it does, the price would be around $ 30 million at best, the two people familiar with Faraday Future finances say about the value of the land. That alone is enough to keep Faraday Future afloat for a few more months, these folks say. (Faraday Future borrowed $ 10 million against that land in November, but it’s unclear if that loan was repaid.)
However, regardless of whether the sale occurs, Faraday Future will end up owing money to Stonehill, in accordance with the terms of the embargo. EV startup agreed to reimburse Stonehill for the cost of due diligence, including travel and legal or consulting expenses, up to $ 100,000.
