Faraday Future's Parent Company Has a Compulsive Spending Problem

Jia Yueting, head of China’s LeEco, is finally copping to claims that there was insufficient money to support the company’s wild expanse into new territories.

This is particularly bad news for the moderately sketchy American automotive startup Faraday Future, which is strategically partnered with LeEco and is quite possibly doomed if its parent doesn’t shape up.

According to Bloomberg, Jia has issued a memo apologizing to employees and shareholders for his reckless leadership. In the letter he also pledged to reduce his income to one yuan (15 cents), while reining in LeEco’s brazen expansion and ensuring a more reasonable pace of growth for the company in the future.

Jia says LeEco will immediately begin cost cutting, decreasing subsidies offered to customers and focusing instead on established businesses instead of new ones. Those new ventures ready to be ignored are likely to include a self-driving car named LeSEE, a concept vehicle built with Faraday Future, and a massive electric car plant being built in Nevada.

That desert EV factory has already come under heavy scrutiny. Nevada’s state treasurer, Dan Schwartz, had expressed repeated worry over Jia’s involvement with Faraday Future. Schwartz even traveled to China earlier this year and attempted to meet with executives at LeEco.

A Faraday Future representative explained to Business Insider in May that LeEco’s business was separate from that of Faraday Future, because Jia was backing Faraday Future with personal assets. Except LeEco actually is bankrolling Faraday Future, including the Nevada factory, and the company is already behind on its bills to the tune of several million dollars.

The LeeSEE and Faraday Future vehicle projects are both part of LeEco’s unlisted ventures; not officially claimed as part of the company but operated via separate unlisted entities. While LeEco has not disclosed any financial numbers for the non-listed companies, they are no less interconnected. Jia Yueting has also borrowed massive amounts of capital to finance the automotive ventures, using his own shares in the listed entities as collateral.

Matters relating to Faraday Future are further complicated as it’s unclear who actually runs and owns the company. It has no CEO and how many shares LeEco or Jia Yueting actually own is a complete mystery. The company has also seen key personal abandoning ship and its promised production vehicle was a no-show at its own Consumer Electronics Show unveiling last January.

We’ll see what happens next, but it sure sounds like Jai and LeEco are thinking of abandoning the automotive industry and focusing on its bread and butter business of video-streaming services. However, Gizmodo spoke with LeEco North America’s Chief Revenue Officer today, who attempted to reassure everyone by saying, “The United States is our highest priority within the company,” and that the car project with Faraday Future was “extremely important.”

Bowman then admitted that LeEco was definitely open to gaining more investors. “As we look through three prioritized countries we will be looking for capital partnerships in all three of those countries,” he said.

[Image: Faraday Future]