A bankruptcy judge will take bids today in an auction for the remains of Fisker Automotive. There are two bidders, both based in China. Hybrid Tech Holdings earlier bought the paper for the U.S. Dept. of Energy’s $192 million loan to Fisker and is using $25 million of that debt as part of its bid. The Wanxiang Group, China’s largest auto parts supplier, which earlier bought Fisker’s battery supplier A123 (now B456) out of its own bankruptcy, stepped in late in the process with its own bid, resulting in today’s auction behind closed doors in New York City.
The question that I’ve had all along is just what assets does Fisker own that are worth tens of millions of dollars or more? The company does own a shuttered General Motors assembly plant in Wilmington, Delaware but it never built any cars there or anywhere else in the U.S. Fisker Karma’s were assembled by a contractor in Finland. The plant has an estimated value of $50 million but there is no shortage of shuttered car factories in North America So what does Fisker own that’s worth buying? An article at the Bloomberg news service by Angela Greiling Keane and Susan Decker says that what makes Fisker worth bidding for is the intellectual property the company owns, pointing to 18 United States patents assigned to the company along with an equal number of pending patents for which the company has applied.
Bloomberg seems to be impressed by those 18 patents and while patent attorney Blair Jacobs of the McDermott Will & Emery law firm told the news agency that the patents have many potential applications companies looking for a play in the alternative-fuels market, I’m not convinced. To begin with, 15 of those patents are design patents, not process or technology patents. They cover the exterior styling and other design elements like the grille, the wheels, the key fob and the side mirrors. Obviously, if either of the bidders wants to put the Karma back into production, those design patents are applicable, but they’re of little value to anyone looking to get into the general field of hybrid cars and alternative propulsion systems.
As for the patents that are pending, the term “patent pending” is a bit misleading since it infers that a patent will be granted. Pending, when used in reference to patents simply means that a patent application has been filed with the U.S. Patent & Trademark Office. While they remain intellectual property belonging to Fisker, until a patent is actually granted, it’s hard to say just what that property is worth.
So we’re left with the three process patents that Fisker has already been assigned:
#8,602,144 Direct electrical connection for multi-motor hybrid drive system, #8,545,353 Drive configurations for high hybrid series/parallel high speed motor drive systems, and #8,491,432 Drive configurations for high speed motor drive systems.
I’m no engineer but they appear to be for a novel parallel/series hybrid drive system that would be more energy efficient, with fewer electrical losses than existing systems. While the systems described in the Fisker patents may one day be the basis of a hybrid car, there’s no evidence that the drivetrain has been developed beyond theoretical stage. That development would surely cost many multiples of the expected $35-$50 million bids and the patents still don’t seem revolutionary enough to me to be the basis of a new car company.
While the design patents will be needed if one of the bidders wants to put the Karma back into production, the technical patents seem irrelevant to that pursuit. The systems described in the Fisker patents have little to do with the existing drivetrain used in the Fisker Karma. That brings us to another matter concerning Fisker’s intellectual property. Fisker doesn’t exactly own the serial hybrid technology used in the Karma. The Karma’s drivetrain is derived from one developed for the U.S. military by Quantum, one of Fisker Automotive’s original backers. Quantum owns that technology, not Fisker.
Former Chrysler, Ford, BMW and GM executive Bob Lutz is currently promoting an enterprise called VL Motors that is taking Fisker Karmas, pulling out the hybrid drivetrains and installing supercharged LS9 V8 engines as used in the Corvette ZR1. He’s also been mentioned in connection with Wanxiang’s attempt to buy Fisker. When I asked him at the Detroit auto show last month about his connection to Wanxiang, he said that he couldn’t comment, so my guess is that he’s still at least peripherally involved. I also asked Lutz specifically about Fisker’s intellectual property and the fact that they don’t own the technology behind the Karma’s drivetrain. Lutz acknowledged that Quantum owns the technology, but that Fisker has a contractual right to that technology based on a per-vehicle royalty fee.
If one of the bidders intends to put the Karma back into production, yes, Fisker owns intellectual property on the design of the Karma and has, contractually, the right to build its current hybrid drivetrain. The successful bidder would be getting something of value in exchange for the bid, assuming their immediate goal is Karma production, but the notion that buying Fisker’s assets is going to make them a significant player in the field of hybrid and alternative propulsion cars is a bit far fetched. Obviously, the bidders think there’s some there there, else they wouldn’t be bidding, but simply put Fisker has never been a technology company the way that Tesla appears to be.
We’ll know on Friday which of the two companies has won the auction. Fisker is required to file a “notice of successful bidder” with the bankruptcy court within one business day of the successful end of the auction. That will be announced on Friday morning, when Judge Kevin Gross has scheduled a hearing.