Bad Buzz For Electric Sedan

0
Bad Buzz For Electric Sedan
From left

Abysmal sales, mounting debt and a lack of new investors have L.A. electric car maker Coda Automotive Inc. looking for a way out.

The company has hired Century City investment bank Houlihan Lokey to advise it on financial options. That could mean seeking new investors, selling the company or its battery division, or even filing for bankruptcy. Neither Houlihan nor Coda executives would say what’s on the table.

“The company is reviewing strategic options to put it on a more sustainable path,” said Coda spokesman Matt Sloustcher. “I can’t comment on anything specific at this time.”

L.A.’s taxpayers are among those with a stake in the company, since the city gave it more than three-quarters of a million dollars to move here. Coda was supposed to create hundreds of local jobs, but that hasn’t happened.

Coda hired Houlihan late last year, about the same time it suspended vehicle production and laid off about 50 workers – steps taken to preserve cash as the company unsuccessfully sought new investors. The company had about 250 U.S. employees at its peak, but now has about 170, many of whom are furloughed.

Coda, led by former General Motors Co. executive Phil Murtaugh, raised more than $300 million from investors since it was founded in 2009, but needed more cash to pay for operations, particularly as vehicle sales never took off. Sloustcher said the company tried to get more than $100 million in additional investment, but it never materialized.

“The company has experienced cash-flow issues as it’s had trouble closing late-stage funding rounds,” he said.

Meanwhile, the company owes millions to its suppliers. UQM Technologies Inc., a publicly traded company that sold electric motors to Coda, said it has more than $8 million in Coda invoices and undelivered inventory, and has already written off some of that amount.

UQM, based in Longmont, Colo., took an impairment charge of $3.8 million in the quarter ended Dec. 31, saying, “There is substantial uncertainty regarding Coda’s ability to honor their obligations.”

Grocery getter

It’s quite a fall for a company that city leaders wooed in hopes that Coda would make good on the claim it would create up to 650 jobs in Los Angeles and the goal of selling 50,000 cars by 2015.

The city shelled out more than $800,000 in subsidies to get Coda to move from Santa Monica to a site on Fairfax Avenue just north of the 10 freeway.

But slow sales and mediocre reviews have dogged Coda since its only model, the Coda Sedan, went on sale last March. Only about 100 vehicles have been sold.

Auto critics gave Coda’s car high marks for having better range than many other electric vehicles, but knocked it for its dowdy design and high price tag: It retails for $38,000.

“The big problem is it’s basically a five- or six-year-old Mitsubishi,” said John O’Dell, a senior editor with Santa Monica vehicle review site Edmunds.com. “It’s not competitive in terms of style, fit and finish. It’s overpriced and underwhelming.”

Big automakers can tolerate weak sales of their electric vehicles while waiting for demand to pick up; Nissan will survive if its electric Leaf model fizzles. But Coda makes only electric cars, and only one model, and few are buying it.

Anaheim electric car maker Fisker Automotive has the same weakness. It makes one model and hasn’t sold enough of them. Fisker is also looking for new investors or a buyer; it hired investment bank Evercore Partners as an adviser last year.

“It’s difficult for anyone to make a new car and compete if all you have is that one car,” O’Dell said. “They’ve only got one product. There’s nothing there to sustain them if they run into a weak sales situation.”

But Coda makes more than cars, and O’Dell said one way for the company to raise cash or stay in business would be to sell its battery technology.

Coda’s battery-focused unit, Coda Energy LLC, has a joint venture with a Chinese battery manufacturer and builds battery systems that store energy from solar arrays and other sources for later use. Sloustcher said that side of the business is growing and, compared with the company’s automotive business, could become profitable more easily.

“Recently, there’s been a lot of interest – on the part of customers and partners as well as from investors – in the company’s energy storage products,” he said. “The energy storage business is much less capital intensive. The investment necessary to get that side of the business cash-flow positive or profitable is orders of magnitude less than automotive.”

That suggests a sale or spinoff of Coda’s energy business could be in the offing. Sloustcher was asked if that was a possibility.

“We haven’t taken any options off the table,” he said.

No posts to display