Thanks to some fantastic reporting from The Verge, we’ve known for a while that things aren’t going great at the mysterious EV startup Faraday Future. Last we heard, the third founding executive had resigned, and morale was so low, the company had trouble making employees come into work. But as unlikely as it may sound, the latest report suggests that Faraday Future is in an even worse position than previously thought.
Recently, The Verge released a long, detailed report on Faraday Future with information gathered from 10 former employees and one person close to the company. The picture they paint is one of a company on the brink of bankruptcy. In fact, four of the employees The Verge spoke to said that unless Faraday Future can find a new investor, it won’t be able to make payroll by the end of the year. Jia Yueting, the company’s main investor and pseudo-CEO, has reportedly continued to meet with investors and has potentially obtained additional funding. But even if FF does make it to 2018, many employees reportedly plan to leave as soon as they can.
Other sources claimed that Yueting, who goes by the nickname “YT,” worked behind the scenes to “shadow manage” Faraday Future despite his official position as “just an investor and strategic partner.” YT also blurred the line between his own company, LeEco, and Faraday Future, even going so far as to plan for FF to produce LeEco’s first electric car. His ambitions also reportedly pushed the fledgling EV startup to constantly change its plans. Instead of building one car at a small factory with a relatively reasonable goal of selling 50,000 units a year, sources say YT insisted that FF plan four models and 150,000 units per year.
“Once he saw that plan, he was like, ‘Well if four models and 150,000 is good, then we ought to be able to go to 5 million cars. What’s it going to take to go to 5 million cars?’” one former employee said. “That’s the kind of guy that he was, it was like, ‘OK, but let’s even think bigger. I need to be at 5 million cars by the end of 2025. In 10 years.’”
That same “think bigger” approach also reportedly led executives to pass on retooling an existing factory and instead announce plans to build a brand new $1 billion plant in Nevada. Sources also say they hired hundreds of employees before there was enough work for them to do.
Where Faraday Future’s money came from and how it was distributed also sounds convoluted at best. YT allegedly put a woman named Chaoying Deng in charge of the company’s accounting and cash management despite her lack of experience with such a large company. Multiple former employees told The Verge that Deng even had more control over FF’s money than its finance directors did. “She wouldn’t allow [them] access to it,” said one. “Chaoying is the gatekeeper,” said another. None of the employees could explain exactly how FF’s finances worked, with one calling it a “confusing mess.”
But despite FF supposedly having received massive investments, cash flow wasn’t necessarily consistent. “It was always, ‘Don’t worry, the money’s coming next month, the money’s coming next month, keep going, keep going, keep going,” one former employee said.
By 2017, access to new investments seems to have dried up. Former employees described a situation where FF essentially kept no money in the bank, only receiving deposits to cover payroll. “The books and records were in bad shape,” said one source. Poor internal controls and “haphazard” financial structuring eventually led international auditing giant KPMG to stop working with FF. After KPMG threw in the towel, several employees left, including Syed Rahman, a former controller in the financial planning and analysis department.
“During my time at Faraday, the company lacked an empowered CEO and COO,” Rahman told The Verge in an email. “This, combined with a lack of understanding of Western business practices, fact-based decision making, and compliance issues exacerbated the problems. The automotive business is highly capital-intensive with low margins, and [with] a lack of effective leadership, success in this arena is not possible.”
With lawsuits piling up, cash running short, and no production cars rolling off the assembly line, it sounds like Rahman is right. Success might not be possible for FF anymore.
Source: The Verge