TTAC News Round-up: Guess How Much Cash Faraday Future Owes the Firm Building Its Factory

Matt Posky
by Matt Posky

If you were thinking a vehicle manufacturer backed by a billionaire with a futuristic hyper-car concept and hundreds of millions of dollars in government tax incentives wouldn’t have problems paying the bills, you would be wrong.

That, Hyundai executives are taking a “voluntary” cut in pay, German prosecutors could be letting Volkswagen’s top brass off the hook, and Honda markets a car you can only drive in California… after the break!

Billionaire backed EV manufacturer has millions in unpaid bills

Automotive News is reporting that AECOM, a construction firm working on Faraday Future’s billion dollar factory, has informed the electric-vehicle startup that it owes millions in unpaid bills.

Robert Gay, vice president and project executive at AECOM, issued Faraday a letter on October 10 that cites an unpaid deposit for September to the tune of $21 million. The letter also forecasts payments due of $25.3 million for October and $11.8 million in November.

Faraday Future, backed by Chinese billionaire Jia Yueting, began developing a 900-acre site in July after holding a much-publicized groundbreaking in April with Nevada state officials. While work on the actual factory isn’t expected to begin for several months, the company hopes to use it to build a range of fully electric vehicles for sale in the U.S. and Asia. To help, Nevada came up with a $215 million incentive package that was approved in December 2015.

But Nevada treasurer Dan Schwartz has already expressed concerns over his state providing hundreds of millions of dollars in incentives for Faraday Future to build a factory outside of Las Vegas. Schwartz’s fears stem from Jia’s heavy reliance on equity-backed loans and China’s volatile stock market.

“You can see where this leads,” Schwartz told Bloomberg back in July. “His Internet company is successful, but that doesn’t generate the billions of dollars he’d need. Where’s he going to get the money?’’

Currently, Faraday has only showcased a single EV in the form of a 1000 horsepower single-seat concept car that will never ever make it to production, but is based off of the modular design it plans to use for future vehicles. Those vehicles are claimed to have 15 percent higher specific energy than a Tesla Model S and, based on some teaser photos, will probably be crossovers. Faraday Future plans to let the public see the finished products at next year’s Consumer Electronics Show.

Hyundai Motor executives to take voluntary pay cut

A spokesman from Hyundai Motor Co told Reuters that a voluntary wage cut was being introduced for executives, but did not specify as to why. However, we can certainly hazard a guess.

Hyundai and Kia Motors have seen their share of the market begin to dwindle, especially in Asia and emerging markets like Russia and Brazil. The company also suffered a record number of strikes this year, including nation-wide walkouts. As a result, Hyundai has lost an estimated $2.5 billion in product.

The company’s second quarter net profit fell 2.6 percent on year, the 10th straight quarterly decline. After so much strife, the third quarter doesn’t look like it will play out much better for Hyundai.

Germany’s VW probe hasn’t yet implicated leading management

Volkswagen Group has been under close scrutiny this year. However, Bloomberg says, German prosecutors haven’t yet found anything tying VW’s top brass to the approval of the emissions-cheating program that started the fiasco.

Prosecutors are investigating 21 high-level executives and believe they possess a decent picture of how the scandal came to be. That doesn’t include any obvious connections between senior management and the decision to implement the plan to program turbocharged direct injection diesel engines to activate certain emissions controls only during laboratory emissions testing.

“If we had reasonable indications in the diesel probe suggesting that board members knew something about illegal action, we would put them on the suspect list, and we would also have communicated that to the public,” Klaus Ziehe, spokesman for the prosecution, said in an announcement. “You may understand from the fact that this didn’t happen that so far we don’t have these indications.”

Although investigations are ongoing in Germany and here in North America, Volkswagen has stuck to the narrative that only a small group of engineers were to blame for the misconduct. But that hasn’t kept the company’s former CEO from resigning or saved it from billions of dollars in fines and buyback costs.

Honda’s car of the future won’t allow you to leave California

Hydrogen may be the most abundant element in the universe but hydrogen fueling stations are right up there with hens’ teeth if you don’t live in California. And, according to the New York Daily News, if you want to own the 2017 Honda Clarity, Honda says you’ll have to live within ten miles of one of those elusive fueling stations. You’ll also need to cover that $60,000 MSRP.

This essentially limits you to San Francisco or Los Angeles.

Replacing the FCX Clarity, the new generation expands its range from 240 miles to an EPA-estimated 366 miles. The predicted range is good for alternatively fueled vehicles, as Toyota’s hydrogen-powered Mirai only yields a range of 312 miles and the current Tesla Model S can only make it 315 before needing a recharge. Although, the Tesla can drive 183 miles away from home without becoming completely useless.

Honda is selling the Clarity this winter in extremely limited numbers. It also plans on expanding the Clarity line with a Clarity Electric and Clarity Plug-In Hybrid in 2017 as part of its push to bring its total carbon dioxide emissions to half of its 2000 levels by 2050.

[Images: Faraday Future; Hyundai Motors; VW Group; Honda]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • PrincipalDan PrincipalDan on Oct 25, 2016

    2017 Honda Clarity... And a what is the RANGE on said hydrogen car? Are they going to put a GPS on the sucker to make sure you never leave California?

  • George B George B on Oct 25, 2016

    I don't understand the value proposition of a hydrogen fuel cell powered car. It's basically an electric car that you can recharge very quickly, but only at a very limited number of locations. A lithium battery electric car takes a long time to recharge, but you can easily and cheaply recharge it in your garage overnight. Both give a California driver solo access to car pool lanes.

    • See 2 previous
    • HotPotato HotPotato on Oct 25, 2016

      For those unfamiliar with the argument, see Basically: battery electric vehicles truly are greener than gasoline powered vehicles overall, and plausibly will become more so over time. Hydrogen powered vehicles, even if using fuel cells, aren't and won't.

  • Varezhka I have still yet to see a Malibu on the road that didn't have a rental sticker. So yeah, GM probably lost money on every one they sold but kept it to boost their CAFE numbers.I'm personally happy that I no longer have to dread being "upgraded" to a Maxima or a Malibu anymore. And thankfully Altima is also on its way out.
  • Tassos Under incompetent, affirmative action hire Mary Barra, GM has been shooting itself in the foot on a daily basis.Whether the Malibu cancellation has been one of these shootings is NOT obvious at all.GM should be run as a PROFITABLE BUSINESS and NOT as an outfit that satisfies everybody and his mother in law's pet preferences.IF the Malibu was UNPROFITABLE, it SHOULD be canceled.More generally, if its SEGMENT is Unprofitable, and HALF the makers cancel their midsize sedans, not only will it lead to the SURVIVAL OF THE FITTEST ones, but the survivors will obviously be more profitable if the LOSERS were kept being produced and the SMALL PIE of midsize sedans would yield slim pickings for every participant.SO NO, I APPROVE of the demise of the unprofitable Malibu, and hope Nissan does the same to the Altima, Hyundai with the SOnata, Mazda with the Mazda 6, and as many others as it takes to make the REMAINING players, like the Excellent, sporty Accord and the Bulletproof Reliable, cheap to maintain CAMRY, more profitable and affordable.
  • GregLocock Car companies can only really sell cars that people who are new car buyers will pay a profitable price for. As it turns out fewer and fewer new car buyers want sedans. Large sedans can be nice to drive, certainly, but the number of new car buyers (the only ones that matter in this discussion) are prepared to sacrifice steering and handling for more obvious things like passenger and cargo space, or even some attempt at off roading. We know US new car buyers don't really care about handling because they fell for FWD in large cars.
  • Slavuta Why is everybody sweating? Like sedans? - go buy one. Better - 2. Let CRV/RAV rust on the dealer lot. I have 3 sedans on the driveway. My neighbor - 2. Neighbors on each of our other side - 8 SUVs.
  • Theflyersfan With sedans, especially, I wonder how many of those sales are to rental fleets. With the exception of the Civic and Accord, there are still rows of sedans mixed in with the RAV4s at every airport rental lot. I doubt the breakdown in sales is publicly published, so who knows... GM isn't out of the sedan business - Cadillac exists and I can't believe I'm typing this but they are actually decent - and I think they are making a huge mistake, especially if there's an extended oil price hike (cough...Iran...cough) and people want smaller and hybrids. But if one is only tied to the quarterly shareholder reports and not trends and the big picture, bad decisions like this get made.