Fisker Automotive, maker of the Karma, a hundred-thousand-dollar electric-gas hybrid sports car, is in deep trouble. It’s laid off seventy-five per cent of its workforce, hasn’t produced a single car in nine months, and may well declare bankruptcy in the next couple of weeks. And opponents of the U.S. government’s attempts to invest in green energy couldn’t be happier, since Fisker received nearly two hundred million dollars in loans from the Department of Energy under a program designed to foster investment in electric and hybrid vehicles. Fisker’s failure (like that of the solar company Solyndra before it) is, as a result, being held up as evidence of the futility of all government investments in green technology. Lou Dobbs said, simply, “All they pick are losers.” And House Republican Jim Jordan, who will be chairing a hearing next week on the government’s loan to Fisker, called the company’s troubles “a very timely case study of what happens when the Department of Energy plays venture capitalist with taxpayer money.”
The blanket condemnation of green subsidies is, of course, purely ideological—Fisker also raised $1.2 billion in private money, but Jordan’s not arguing that this is proof that private investors should stay out of the business of investing. And contrary to Dobbs’s assertions, many of the government’s investments are still doing well (including, most notably, Tesla, which just turned its first profit). And anyway, this is the nature of venture capital: you make many bets, knowing in advance that some are going to fail. The key to making government investments work is that when those investments go bad, the government, like any good private investor, has to be willing to cut companies off instead of keeping them on life support. That’s precisely what the Department of Energy has done. Fisker was originally awarded five hundred and twenty-nine million dollars in loan commitments, but when it failed to meet production deadlines on the Karma, the D.O.E. cut off the company’s access to three hundred and thirty-six million dollars of those loans. Far from coddling Fisker, the government has been a stern taskmaster—indeed, reports suggest that it’s the D.O.E. that’s been pushing hardest for Fisker to file for bankruptcy.
But focussing on the political aspect of the Fisker story obscures the real lessons of the company’s failure, which have to do with privileging design over performance, and the perils of bringing a new product to market before it’s actually ready. The initial excitement over Fisker was understandable. The technology behind the Karma, which relied primarily on electricity but also had a gas engine to extend the vehicle’s range, promised much better gas mileage than existing hybrids but also, because of the gas engine, greater ease of use than purely electric cars. And the Karma was also exceptionally stylish—its distinctive, eye-catching design promised to make hybrids not merely sensible and responsible but cool. The problem was that the Karma’s insides did not live up to its gorgeous outside.
Its interior design was, to begin with, not all that functional—Consumer Reports lamented its “poor dash controls, limited visibility, a cramped interior, awkward access into and out of the seats, …and a small backseat and trunk,” while the auto blog Jalopnik said the Karma had “an interior the size of a Geo Metro [and] build quality that has a real Pyongyang sort of charm.” The Karma was also surprisingly noisy, especially when the gas engine kicked in, and its engine lacked, in Consumer Reports’ words, “the oomph you would expect.” It was a “sports car” that performed more like an ordinary sedan.
On top of this, and perhaps even more importantly, the first Karmas rolled off the assembly line full of bugs. The first Karma that Consumer Reports tested simply died, and early Karma owners reported a host of problems ranging from a car shutting itself off while in motion to trouble with the electronic dashboard controls to, in two separate cases, cars catching fire. Fisker had to issue two separate recalls, and at one point a quarter of all Karmas ever made were in the shop. Fisker released the Karma long after it had been promised, but, even so, the launch clearly came too soon, before the kinks were worked out. And the problems with the Karma were arguably exacerbated by the fact that Henrik Fisker, the company’s founder, was a design guru rather than a manufacturing guy, which meant that the company did a poor job (at least until Fisker was replaced as C.E.O.) at the basic things necessary in creating a car that’s reliable as well as stylish.
Fisker did deal with many of the Karma’s problems, and current Fisker owners (and employees) insist that those initial reviews are no longer accurate. But that doesn’t really matter. In today’s consumer marketplace, the margin for error is too small to make the kind of mistakes that Fisker did, because the general rise in product quality over the past few decades has made consumers more intolerant of failure than ever before. It may still be O.K. for companies to issue beta versions of free software and then improve on them over time, but that’s much harder to do with hardware. That’s especially true when it comes to luxury products in general, and automobiles in particular. As a recent Accenture study showed, quality is the most important factor luxury shoppers consider when making purchases, and when it comes to automobiles the quality bar has been rising steadily over time: as the most recent J. D. Power study put it, car manufacturers “are producing higher-quality vehicles than ever before.” Once upon a time, the unreliability of a car like the Jaguar may have been part of its charm; today, consumers expect high performance and high reliability, and the proliferation of product reviews and consumer Web sites means that when companies don’t deliver, they are immediately punished. Fisker seems to have assumed that the combination of cool technology and stylish design would buy it some room to make mistakes. But that was a fatal assumption. The company’s failure illustrates the truth of one of the hoariest of business adages: you never get a second chance to make a first impression.
Photograph by Kevork Djansezian/Getty
