Faraday Future Confronting Layoffs, Pay Cuts, Probable Corporate Doom

Following a previous article about Faraday Future, the manufacturer reached out to yours truly to clarify a few things. First of all, the company deemed the headline and body a bit “jagged.” Understandable, as no manufacturer wants to be called “America’s Worst Automaker” by some bespectacled creep sitting behind a keyboard. Faraday’s spokesperson also noted that deliveries would not begin in December and that the vehicle fire we referenced was a “minor incident” involving a pre-production model undergoing testing at the firm’s Hanford manufacturing facility.

Actually, that makes things sound a little worse than initially reported, as it appears the company doesn’t have a production date anymore. But I will acquiesce that I could have been clearer with that’s going on with its new financial backer, Evergrande. The pair have been at each other’s throats over money for a while, which is important because the spat is now costing people their jobs. We really need to get into the nitty gritty as to why.

Officially, Faraday claims real estate giant Evergrande tried to screw the company out of funding and gain control by making it impossible for CEO Jia Yueting (known within the company as “YT”) to begin production. According to their initial agreement, FF has until the end of the year to start production — or Jia will be forced to bow out.

From Faraday Future:

After its initial $800 [million] investment, Evergrande agreed in July 2018 to make further payments earlier than originally agreed, including $500 [million] of the $1.2 billion, in 2018. Contrary to what Evergrande has told the press and its shareholders, neither FF’s CEO YT Jia nor anyone else “manipulated” the board of Evergrande in reaching these agreements. In agreeing to bring a portion of its payments forward to 2018, Evergrande had a full understanding of why the funds were needed, and when they were needed, in order to achieve production and delivery of FF 91 in 2019. But contrary to what has been reported, Evergrande failed to make any of the promised additional payments beyond the original $800 [million] investment, despite FF and its CEO complying with their obligations and meeting all required conditions for funding under the July 2018 agreement. Instead, Evergrande held the payments back to try to gain control and ownership over FF China and all of FF’s [intellectual property]. At the same time, Evergrande is preventing FF from accepting any immediate financing from other sources.

While we’re just about positive Evergrande is trying to oust Jia and gain control of the automaker’s IP, it’s not clear if this was the investor’s plan all along or if it simply became annoyed with the company asking for more money up front. Faraday needed a lot of money to handle unpaid debts and it’s believed that a significant portion of the initial $800 million went toward that. But FF claims all parties were aware of that going into the deal.

From Evergrande’s perspective, Jia tried to get the board of directors to approve an advance of $700 million, which was refused. It then claimed that CEO took the case to an arbitrator in Hong Kong, on the grounds that it had welched on their July arrangement. That appears unsettled as of the time of this writing. But, with so much of the automaker’s funding coming out of China, it’s a little tricky for us to tell exactly what’s going on.

We don’t even know the exact terms of Faraday’s deal with Evergrande, just that the real estate company had a lot of leverage since the automaker was so desperate for funding at the start of the summer. However, it appears the manufacturer put up basically everything it had, including its intellectual property, as collateral.

Now, The Verge reports that these money troubles have come to a head (yet again) and are affecting FF’s staff. Faraday Future is cutting its employees’ salaries by 20 percent, according to internal emails. Layoffs are also said to begin soon, though the number of staffers affected is unknown. Jia Yueting has also decided to decrease his annual salary to just $1 — with some members of the management team electing to take pay cuts in excess of 20 percent as a sign of good faith.

It’s not quite the comeback Faraday Future was hoping for. It’s also a little sad this time, as regular peoples’ lives are being affected after being issued $800 million in hope. We may frequently engage in taking jabs at wealthy executives who mismanage their companies without an overabundance of guilt, but it’s a different story when regular folks are involved. And we doubt Faraday’s line workers have access to a stellar severance package.

[Image: Faraday Future]