It was in April 2010 when the Port of Los Angeles agreed to buy its first hydrogen fuel-cell truck, part of an ambitious new program to invest in zero-emissions technology.
The truck would be the first of its size to run on a combination of two fledgling technologies, exotic fuel cells and electric car batteries. But the truck, expected within six months, has yet to be delivered by local startup Vision Motor Corp.
In fact, the company has only produced one truck for a client so far and has lost other business due to delays.
Now, a former employee’s allegations in a law-suit may be creating a window into the ongoing unrest at the El Segundo company. The allegations by Russell Miller Jr., a former investor relations director, portray a startup hampered by internal turmoil and miscommunication.
Indeed, the small public company of fewer than 10 employees has had three chief financial officers, replaced its heads of investor relations and business development, and sued two former executives since last year. All the while, the company has received more than $700,000 from the ports of Los Angeles and Long Beach but has struggled to meet deadlines.
Vision’s struggles out of the gate aren’t unique. In addition to Vision, L.A. port officials have given out millions of dollars in contracts to Balqon Corp., a Harbor City electric truck maker. The port has paid Balqon $6.4 million for electric trucks that couldn’t last a full shift and has spent more trying to retrofit them.
One former Vision employee who spoke to the Business Journal on the condition of anonymity described infighting and personality clashes, something echoed in Miller’s allegations, which depict several run-ins between employees and management over the company’s direction.
“It would have been a lot better run without that type of culture,” the former employee said.
In addition to infighting, Miller claims in his Los Angeles Superior Court lawsuit that Vision misled the public and its employees about the company’s finances and progress of its technology.
Miller was not made available for an interview by his attorney, Farhad Novian, who in a brief interview with the Business Journal reiterated the main claim in the lawsuit, which was filed this month and is pending.
“He was terminated in retaliation for the investigation into the company’s technology and into accounting practices,” Novian said.
Martin Schuermann, Vision chief executive, denied the charges in an e-mail statement.
“We deny any and all allegations in the complaint by Russell Miller, a former employee of Vision Motor Corp. The company will defend its position to the fullest extent of the law, including seeking damages from the plaintiff where appropriate,” the statement read.
Vision, a transportation technology firm, only got into the fuel-cell business in late 2008 when it acquired fuel-cell technology licenses from Ice Conversions Inc., a Malibu firm headed by Lawrence Weisdorn and Donald Hejmanowski, who were made executives.
The company began working to produce vehicles that used hydrogen fuel cells to recharge electric batteries on heavy-duty trucks. The idea was it would order most of its parts from third parties, with its only proprietary technology being the vehicle’s software.
By any measure, powering trucks with electric car batteries is a cutting-edge technology, but adding fuel cells – which combine hydrogen with oxygen to produce electricity – moves the technology into the exotic realm. Honda Motor Co. Ltd. has been leasing a small fleet of $1 million fuel-cell passenger cars on a test basis to Southern California customers since 2008. However, Honda has not found the technology viable enough to build a production model.
Still, Vision’s efforts sparked interest. It showed off early versions of its Tyrano, a truck designed to haul cargo to and from the ports, to L.A. port officials. It also displayed the truck at an October 2009 press conference in Sacramento attended by then-Gov. Arnold Schwarzenegger. During that event, Vision executives pronounced bold plans to sell thousands of trucks.
A typical new clean-burning diesel truck can cost $100,000 or more. But in March 2010, Vision made its first sale, winning a $280,000 contract from the L.A. port for a single Tyrano, which was just to haul educational exhibits to schools. Delivery was scheduled for that September.
But cracks began to show in May 2010 when Weisdorn and Hejmanowski abruptly resigned. The company later filed a lawsuit alleging that Weisdorn and Hejmanowski had secretly worked for a competitor, Force Fuels.
In the fall of that same year, it terminated two more employees, who questioned the company’s accounting practices and work environment, according to Miller’s lawsuit.
At the same time, Vision continued to collect contracts. Port officials in Los Angeles and Long Beach teamed up in December to pay $425,000 for two trucks to be delivered in early 2011. And in March of last year, the company was awarded an L.A. port contract of up to $1.4 million to retrofit underperforming electric trucks made by Balqon, which couldn’t last a full shift without stopping to recharge.
When it came to actually delivering results, however, progress was slow. The company missed initial delivery dates for all three trucks, with a spokesman telling the Business Journal at the time that the delays were caused by a long wait for parts.
Vision also struggled to retrofit Balqon’s trucks. Port officials eventually canceled the contract after paying more than $200,000 and gave the work back to Balqon. Earlier this month, Vision told the Business Journal that it had difficulty integrating its software with Balqon’s technology.
By this time, shares of the company on the OTC Bulletin Board had fallen from a high of more than $3 in the promising days of early 2009 to penny stock status. Shares closed at 7 cents April 19.
Driving without fuel cells
Miller alleged in his lawsuit that toward the end of 2010 he confronted management after learning from employees that the company’s trucks were further behind than was let on. He even claims that the trucks shown to Schwarzenegger and port officials were battery only and did not have fuel cells.
Phillip Sanfield, an L.A. port spokesman, acknowledged that in 2009 a port consultant was taken on a test drive, but was told up front “it was not a fully functioning fuel-cell vehicle like the actual truck would be.”
The anonymous former employee said development of the trucks was challenging and it was hard to know what was on a truck when it was being presented because parts were constantly being swapped in and out. But he said the larger issue was that of a turbulent work environment that affected productivity.
“People would be very harsh with each other,” he said. “It was a culture that developed from the top down.”
Around the same time, the company terminated Miller, citing insider trading. But he traces his dismissal to conflicts between employees and management over the company’s accounting practices and its technological progress. He claims the company overstated its financial informational to shareholders, citing two letters sent by other former employees to Schuermann alleging that they were fired for insisting on correct fiduciary procedures.
One wrote, according to the lawsuit, that he was fired for “telling the truth in response to questions from our accounting department,” and that on occasions Schuermann told the employee “specifically to lie and said ‘that is what you have to do sometimes in business.’”
These run-ins also paint a picture of a tense work environment with high turnover. Since Miller’s departure, the company has seen departures of at least two other employees and the resignation of its chief financial officer.
Positive outlook?
Still, the former employee said that he thought Vision was poised for success after some of the ups and downs.
“Customers like the product and they want it,” he said. “It has the support of the trucking industry and that’s all that matters at the end of the day.”
One of two Vision trucks paid for by the L.A. and Long Beach ports was delivered in July of last year for testing to Rancho Dominguez’s Total Transportation Services Inc.
TTSI President Vic La Rosa said that he’s been impressed with the truck’s performance so far, despite some bumps such as problems with the fuel-cell cooling system.
In fact, La Rosa is applying for a Department of Energy grant worth about $30 million that would help cover the cost of 100 Vision trucks that the company would test further.
He added that some of the early expectations were unrealistic.
“Everyone was looking for this truck to replace diesels on the road right now,” he said. “We’ve learned a tremendous amount of information that we believe will make the production model really untouchable.”
And now, the very first truck ordered by the L.A. port in early 2010 is supposed to be delivered this summer, but the port will be paying more. The new truck will cost $90,000 more, or $370,000, but is supposed to have twice the range at 400 miles.
“The port continues to work with Vision,” said L.A. port spokesman Sanfield.
