Struggling EV Startup Faraday Future Lays Off Workers & Cuts Wages By 20 Percent
Faraday Future (FF), the struggling electric vehicle startup has announced significant layoffs and employee salary cuts of 20 percent, as the company burns through its cash in pursuit of Tesla and other electric vehicle startups in the luxury electric car space.
The cuts were announced in an email obtained by The Verge which was sent to employees on Sunday night. The pay cuts will go into effect next week. FF CEO Jia "JT" Yueting also agreed to forfeit his salary and agreed to be paid a salary of just $1 per year.
"The company is committed to monitoring its finances and will reevaluate this decision with the goal of restoring salaries once funding is available," the email to reads.
The number of positions being eliminated was not disclosed and no layoffs have been filed yet with the state of California. FF has not yet commented on the layoffs.
Faraday Future's Complicated Financial Situation
The news comes after a rift between the automaker and its biggest investor Evergrande Health Industry Group, the healthcare division of Chinese real estate group Evergrande.
Last December FF announced its has secured $2 billion in funding from Evergrande to keep the company afloat. Evergrande agreed to invest the money in FF over the span of three years in exchange for a 45 percent share of FF stock, starting with an initial payment of $800 million which was made at the time.
The disbursement of funds was contingent on FF meeting agreed upon production goals for its luxury electric SUV, the FF91. Here's where things get complicated.
In June, Evergrande Health Industry Group announced the acquisition of Hong Kong-based Season Smart Limited for 6.746 billion HK dollars ($860 million). Season Smart Limited already had a deal in place with FF in a separate joint venture.
The acquisition allowed Evergrande Health Industry Group to indirectly obtain a 45-percent stake in Smart King Limited, the joint venture (JV) previously established by Season Smart Limited and Faraday Future.
Season Smart Limited earlier offered a capital contribution of $2 billion to obtain a 45-percent stake in the JV, but Evergrande Health now owns that stake. Evergrande Health therefore switched places with Season Smart, becoming the largest shareholder of Smart King, which in turn owns 45 percent of Faraday Future.
However, in July 2018, the original shareholder put forward that the $800 million paid by Season Smart to FF was all gone, and asked that Season Smart further advance another $700 million lifeline.
Evergrande claims Faraday has wasted hundreds of millions of dollars, while Faraday insists that Evergrande has broken agreements to make payments to the company.
CEO JT failed to convince the board of directors to approve the additional advance of $700 million for FF and He took the case to an arbitrator in Hong Kong. However, the outcome of the case is not clear.
Faraday Future said in Sunday's email that it's "pursuing funding opportunities with those who share our vision."
Meanwhile, the struggling automaker is running low on cash and is blaming Evergrande for its current financial situation.
"Faraday Future is facing issues with its current funding because of Evergrande's failure to live up to its end of the bargain and make the payments it agreed to," the company wrote.
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