Article by | Wu Yihan
Edited by | Wu Xianzhi
On October 25th, according to media reports, Faraday Future (FF) announced in an email sent to employees last week that it will reduce salaries by 25% for all employees from November this year, and the salary reduction is expected to continue until the end of this year.
It is reported that the delivery of the first electric car FF 91 Futurist by FF is still ongoing, and the equipment of the FF ieFactory California plant located in Zephyr Cove, California, USA, is already in place and undergoing testing; FF’s landing project in China has also made breakthrough progress before.
The report stated that FF’s cash reserves are sharply decreasing. As of September 21st, the company’s cash was $39 million, lower than the approximately $47 million at the end of August. According to insiders, FF had laid off dozens of employees not long ago, and is now raising new funds for delivering its first electric car, either by layoffs and salary cuts to keep the cash or by making bottom-line preparations before raising sufficient new funds.
Regarding the salary reduction, FF has also taken corresponding “compensation” measures for its employees: employees will be awarded restricted stock units (RSU) equivalent to the amount of salary reduction to offset the reduced salary, and the restricted stock units will be issued in December. However, if an employee is dismissed, all acquired restricted stock units will be confiscated. That is to say, if employees are dismissed by the company during this period, these “compensations” will become empty promises.
On October 26th, FF fell 4.1% to $0.552 before the market opened. The next day, FF announced the appointment of Yun Han as CFO and interim CFO, effective from October 25th, 2022. Han Yun will succeed Becky Roof, who resigned as the Acting CFO on October 12th and assist the company in ensuring an orderly transition.The company also announced that it has received 55 million dollars in financing as scheduled from a subsidiary of ATW Partners LLC (excluding an additional $5 million bridge note), and is expected to receive the first $10 million under a $60 million financing agreement this week.
Due to the cash flow shortage, FF urgently needs new funding to keep going. It seems that the company will get new injections of funds that can temporarily relieve the current cash flow crisis. Then, what is the reason for the repeated delay in new car delivery?
First of all, let’s review some of the important events that have happened to FF in the past year:
Initially, FF announced that the first batch of FF91 new cars would be delivered in July of this year, which was later changed to the third quarter. However, until now, when we are about to enter November, there is still no news of successful delivery from FF.
In October, FF released real-life production line photos, indicating that the production equipment has been basically set up and pre-production testing is underway, and production technology and equipment are no longer a problem.
Among the many factors behind the delays, lack of money may be one of the most important reasons.
Jia Yueting regains control of FF and there are new changes.Prior to this, FF was affected by “completely unfounded false accusations” during the introduction of funds, and some directors sought bankruptcy for personal gain, leading to litigation. According to public information from the U.S. SEC and media reports, some investment institutions had expressed a strong desire to invest in FF, but investors were concerned about the chaotic management of the board of directors at the time and ultimately took a wait-and-see attitude towards FF’s future development.
Later, with the assistance of FF’s second-largest shareholder, the company reorganized its board of directors, and Jia Yueting returned to power smoothly. The company, which had been on the brink of bankruptcy liquidation since it was founded by Jia Yueting, regained control in the hands of its founder last month.
Now, the directors who hindered FF’s financing and delivery of new vehicles have been cleared out, the company’s control has returned to Jia Yueting, and with the support of a $100 million financing, the future looks promising.
As we approach 2023, news of when the new car will be launched and delivered has yet to come, but we received news of across-the-board pay cuts. This sudden news naturally raises questions as to whether the delay in production and delivery of the FF 91 is due to the company’s difficulty in cash flow or other problems in the manufacturing process.
In fact, Jia Yueting’s debt problems are also an important factor that has raised questions about FF’s future development, and for his automotive business, apart from domestic creditors, more people hold a “watching the fun” attitude. Whether FF can successfully overcome this difficult period, and when the FF 91 will be successfully put into production and delivery in the future, seems to be a mystery.
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.