Faraday Future teeters on the brink of collapse say insiders

January 20, 2017

The photo above was taken last April at the groundbreaking ceremony for Faraday Future's $1 billion plant in Nevada.

In light of new reports from company insiders, it could double as a shot of folks shoveling dirt on the company's grave.

Those reports suggest that Faraday faces several major problems--problems that, if not resolved very, very soon, could force the company to shut down within months:

Problem #1: A lack of leadership. On Faraday's (glitchy, crash-prone) website, the company lists a six-person executive team. None of those executives bear the title of CEO, and that's a major problem. Every company needs an official leader, one with the ability to make decisions, sign checks, and set goals. Faraday has no such person. All they have is...

Problem #2: Faraday's founder, Chinese entrepreneur Jia Yueting (who occasionally goes by YT). Because the billionaire bankrolled the company, he apparently feels entitled to call the shots. But while YT may know how to build smartphones and TVs in China, as he's done with his company LeEco, he clearly doesn't know how to build cars in the U.S. Since the company's founding three years ago, he's been on hiring and spending spree, and only recently came to the conclusion that he'd overextended his resources.

YT's rude awakening could signal the beginning of a turnaround for Faraday. However, it's undoubtedly an ominous sign for the company's 1,400 employees--not to mention the many vendors to whom Faraday owes some $300 million. Which brings us to...

Problem #3: Serious cash shortages. Faraday isn't yet selling cars, so at the moment, it's relying solely on investors for operational funds. Money does come in, but employees don't know where it's from, YT doesn't explain, and it's only about 10 percent of what the company needs to stay afloat. YT and his well-heeled pals have generated about $1 billion in bond funds in China, but there are serious doubts as to whether Beijing will let that much cash out of the country. In which case, the money may go to...

Problem #4: LeEco. Faraday exists in partnership with LeEco, where YT serves as CEO. Though the two companies are supposed to be working on electric, autonomous cars together, it appears that LeEco is taking the lead, with Faraday as a secondary, foreign subsidiary. Some insiders suggest that YT has prioritized launching cars in China first, neglecting Faraday in the process. Which would explain...

Problem #5: The lack of a jaw-dropping prototype. The FF 91 that Faraday unveiled at CES earlier this month got a very lukewarm reception. There were hopes that the debut would generate huge numbers of reservations, which, at $5,000 a pop, would create some much-needed cashflow. Unfortunately, the car failed to impress, and estimates are that only 60 people ponied up, resulting in an underwhelming infusion of $300,000. 

According to one insider, if Faraday doesn't get money out of China and/or generate loads of cash from new investors by May, it may have to shut down entirely. Another insider suggests that the window could be closing faster--as soon as 60 days.

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