In the time since EV startup Faraday Future first announced drastic layoffs and salary cuts last October, another new challenge has emerged: 11 new lawsuits filed against the company by suppliers and contractors, nearly all of them previously unreported. In total, the companies are seeking nearly $80 million in owed payments, damages, and fees from Faraday Future.
The lawsuits all allege that Faraday Future stiffed these companies shortly after signing contracts with them. It’s a claim that’s been made about Faraday Future in the past, like when it reportedly owed some $100 million in unpaid bills during an previous financial crisis in 2017. But viewed together, the new lawsuits provide unprecedented clarity about how much the startup currently owes, and to whom. Faraday Future’s chief financial officer Michael Agosta admitted in court documents last year that the startup owed suppliers “more than $59 million” as of October 2018. The new lawsuits suggest that total number might now be much higher. (A representative for Faraday Future did not respond to a request for comment in time for publication.)
The lawsuits also come at a time when the California startup is nearly out of cash. An ugly, public fight in late 2018 with its main financial backer, Chinese real estate conglomerate Evergrande, has left Faraday Future on the brink once again. While a truce was called, hundreds of employees who were placed on unpaid leave in December were told this week the company doesn’t have enough money to bring them back. Faraday Future is having trouble finding another investor to back its efforts, and in the meantime, some crucial employees — including the team behind the company’s electric drivetrain — have jumped ship to rival EV startup Rivian.
The biggest lawsuit of the 11 filed since last October comes from the Illinois subsidiary of major German automotive contractor Eisenmann Corporation. Faraday Future hired Eisenmann in May 2016 to build one of the most expensive and critical sections of its planned $1 billion factory in Nevada desert: the paint shop. Faraday Future initially agreed to pay nearly $230 million for the paint shop, and $11 million for a second smaller paint shop, according to the lawsuit, which was filed on December 21, 2018.
But the startup only paid $32 million to Eisenmann before it delayed – and ultimately canceled – plans for the giant factory in July 2017. Eisenmann claims Faraday Future never paid the agreed-upon cancellation fee, and that the EV startup now owes “no less than” $74,566,206, according to the language in the contract.
On December 20th this past year, California-based marketing agency The Visionary Group also sued Faraday Future for breach of contract, as was first reported by The Verge. The agency was hired by Faraday Future in June 2018 to orchestrate a last-minute event at the Pebble Beach Concours d’Elegance car show, which took place in August 2018. But Faraday Future’s fight with main investor Evergrande began escalating at the same time, which meant the startup was running out of money as a result. (Faraday Future only had $18 million in the bank by September, according to the testimony of its CFO.) Faraday Future ultimately backed out just 12 days before the event. The Visionary Group is asking for $1.9 million in damages and fees.
Multiple companies hired by Faraday Future to place employees or provide equipment were also among those to have sued the EV startup over unpaid bills. Total Western Inc., a California contractor that provided construction and maintenance services to Faraday Future in 2018 at its Los Angeles headquarters and Hanford factory, says it is owed around $1 million. Robert Half Executive Search claims in its own suit, filed December 2018, that Faraday Future hired the staffing firm in December 2017 to help find a chief financial officer and a treasurer. The EV startup never paid the $196,332 that the companies agreed to, according to the lawsuit.
IT staffing company Tentek placed 13 employees with Faraday Future after March 2018, according to its own lawsuit filed against the EV startup on October 24th of last year. But Faraday Future still owes it at least $200,000, and Tentek is asking for $281,194 in damages and fees, the staffing agency claims. Century Group Professionals says in its own lawsuit filed on November 5th that it placed four employees but never got paid for that work. It’s seeking $76,614 in damages.
The list goes on. Global design firm Edenspiekerman was hired in February 2018 to refresh the user interface and user experience in Faraday Future’s vehicles but never got paid, according to a lawsuit filed on October 31st of last year. The company is seeking $542,302 in owed pay and fees.
Faraday Future also allegedly didn’t pay for basic office and technical work. Software company Lighthouse was hired in February 2018 to provide services like “consulting, data collection, forensic analysis,” and more, according to a lawsuit filed on November 14th of last year. Faraday Future “failed to pay anything,” Lighthouse says. The company is seeking damages of $297,848 plus interest. Computer component company Arrow Electronics says in a suit filed on November 26th of last year that Faraday Future owes it $84,943, while broadband company Fireline claimed in a suit filed October 19th that it is still owed $24,151 from work dating back to 2016.
Even Vending One, the California company Faraday Future hired to fill its headquarters with vending machines after its infamously catered lunches were starting to cost too much, says the EV startup still owes it $12,469 in a lawsuit filed last year on December 14th.
Lawyers for the plaintiffs and for Faraday Future did not immediately respond to requests for comment.
At the same time, Faraday Future continues to bleed employees, including some who were key to the company’s success. In fact, three of them have jumped ship to a rival. Silva Hiti, a veteran of General Motors who worked on the company’s first production electric car, the EV1, left Faraday Future for EV startup Rivian in January according to her LinkedIn account. Young Doo and Steven Schulz, who were also EV1 team members, also just took roles at Rivian, according to LinkedIn.
Losing talent like Hiti and her EV1 coworkers will make it hard to move forward even if Faraday Future finds new investors, former employees tell The Verge. Along with Peter Savagian, who resigned from Faraday Future in October 2018 the same week that the company lost co-founder Nick Sampson, they were part of a core group that helped build the FF91’s most critical components. Their hiring in 2016 also helped Faraday Future establish some of the legitimacy that propelled its profile in the early going.
In addition, Lewis Liu, who was Faraday Future’s head of strategic partnerships and business development dating back to 2016, recently left the company to join Karma Automotive. Mercedes-Benz veteran Stanley Chapman, who ran Faraday Future’s manufacturing facility in Hanford, California, also left the startup in January and returned to the German automaker according to his LinkedIn profile. (Liu, Doo, and Schulz could not be reached for comment. Hiti and Chapman declined to comment.)
Holding onto talent is one problem, but Faraday Future will also need a lot of money if it ever wants to make its luxury SUV, the FF91. Agosta, the CFO, said in court documents released last November that Faraday Future would need at least $116 million in order to start production. But another executive told employees at a meeting in December that it needs closer to $500 million.
Since then, Faraday Future has had trouble lining up funding, even after reaching the truce with Evergrande at the end of 2018. The company says it’s in “serious discussions with potential investors to raise both asset-based debt financing and equity funding,” though two people familiar with the company’s finances say it’s struggling to close a deal because CEO and founder Jia Yueting refuses to cede any control.
One remaining lifeline for the company is the land in Las Vegas where it planned to build the $1 billion factory. Faraday Future has held onto that land throughout the turmoil of the last two years, and it may have found a buyer, according to documents obtained by The Verge: New York City hedge fund Stonehill Capital Management.
A lien filed on December 31st with the Clark County Recorder’s office in Las Vegas shows that Stonehill is currently doing due diligence on the 920 acres Faraday Future owns there, though a sale has not gone through. If it does, the price would be around $30 million at best, the two people familiar with Faraday Future’s finances say of the land’s value. That’s only enough to keep Faraday Future afloat for a few more months, these people say. (Faraday Future borrowed $10 million against that land in November, but it’s unclear if it’s paid back that loan.)
Regardless of whether the sale happens, though, Faraday Future will wind up owing money to Stonehill, according to the terms of the lien. The EV startup agreed to reimburse Stonehill for the cost of the due diligence, including travel and legal or consultant fees, up to $100,000. A lawyer for Stonehill did not immediately respond to a request for comment.