The crisis-ridden Californian electric car startup Faraday Future plans to comprehensively restructure. CEO Jia Yueting is stepping down as CEO in order to save the company and pay his debts.
Jia Yueting is attempting to settle both his personal debts and the company’s debts by setting up a trust fund. According to pandaily.com, the trust fund is to be financed with Jia’s shares in Faraday Future. This should give him and the company enough money to pay off debt, which he has publically declared that he will take full responsibility for.
Faraday Future’s already volatile history is thus enriched by another, somehow confusing chapter. It seems unclear how the startup will convince investors and shareholders after some very public disputes, not least with its main financier Evergrande and the sale of the headquarters in Los Angeles. Evergrande’s stellar rise through the EV industry started on very shaky ground with Faraday Future: Although the initial deal worth a whooping 2 billion dollars was only settled in July of last year, the two companies quickly fell into dispute.
Evergrande accused Faraday Future of manipulating it into paying 800 million US dollars upfront and then asking more, while the carmaker said that Evergrande was deliberately holding back investment to starve the company for the purpose of obtaining its intellectual property. Faraday employees even turned to crowdfunding to keep the company afloat. In December last year, Evergrande said it agreed to restructure its investment pledge in Faraday Future, and both sides agreed to drop all allegations against each other. To date, Evergrande has invested 800 million US dollars in Faraday Future and now owns a 31% stake in the company but will not make any further investments.
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Faraday Future will at least no longer be in Jia’s hands after his withdrawal – but it remains to be seen to what extent the company founder will continue to interfere in the company’s affairs if his personal financial situation is so closely linked to the fate of the company via the trust fund.
Just how toxic the presence of chief executive officer Jia Yueting has been on the company is perhaps best illustrated in his history with Stefan Krause, who worked at Faraday Future before he founded Canoo. At Faraday Futures, Krause had recruited potential investors who said they would only invest if controversial Chinese investor Jia Yueting would be willing to loosen its ties with the company. Jia Yueting was not, and in late 2017, Krause – a former BMW executive – left Faraday Future to found Evoluzity, now called Canoo. Krause’s financing talents were thus lost to Faraday Future and devoted to the new startup where he was able to secure 1 billion dollars in funding. Even having left the company Krause’s startup efforts were hampered by a rather belligerent and famously difficult Jia Yueting, who accused Krause and other former Faraday Futures employees of stealing secrets from their former employer. Now Jia Yueting is doing what Krause suggested back in 2017. It remains to be seen if Jia’s resignation should enable the company to revive itself.
Those hoping to buy Faraday’s electric SUV will have to wait a while at least. According to pandaily, the startup still needs close to $500 million to put the FF91 into production. At the same time, the company will have to contend with the lawsuits from suppliers and contractors that are piling up – at least 11 companies are individually suing the Faraday Future for a total of more than $80 million worth of unpaid bills.
It is possible that a well-known name in a joint venture may help to rebuild Faraday Future’s reputation. The most recent reports indicate that Faraday Future is also likely to partner with another company but further details have not yet emerged on this front.