Faraday Future, once seen as a 'Tesla killer,' is said to be in shambles as cash runs low and executives flee
Ethan Miller/Getty Images)
Early this month, a roster of company executives and Faraday's most visible investor, Chinese billionaire Jia Yueting, gathered at the International Consumer Electronics Show in Las Vegas, the annual mega-showcase for the technology, electronics, and auto industry's buzziest new products, from drones to TVs to self-driving cars.
For Los Angeles-based Faraday Future, it was a chance to prove to the world that the company is for real, after its first appearance at CES in 2016 raised more questions than it answered. The startup had unveiled a sleek autonomous prototype, but the vehicle turned out to be an inoperable one-seat race car that might never be built - hardly a challenger to Tesla's growing fleet of electric vehicles that the tech press had been hoping for.
Business Insider interviewed eight people with intimate knowledge of Faraday Future's business to learn about the state of affairs leading up to the CES presentation. All the executives spoke on condition of anonymity so that they could speak freely.
They described a business in shambles, with more than a half-dozen senior executives departing since last spring - including Faraday's global CEO, who had left just before CES. The current and former Faraday insiders also describe millions of dollars in unpaid bills, and a chaotic corporate structure between Faraday's US and Chinese operations. The most immediate of Faraday's problems is its cash shortage, insiders said. "If CES doesn't bring in fresh investors, it's over between February and May," one source close to the company told Business Insider.
The accounts in this story were presented to representatives for Faraday Future and its Chinese partner LeEco, who described the accounts as speculation and declined to comment further.
Ethan Miller/Getty Images
It starts with Jia
Jia Yueting is Faraday Future's only publicly known investor.
Sometimes referred to as "YT," Jia is CEO of the Chinese electronics company LeEco, which makes smartphones, TVs, and virtual-reality headsets. Forbes estimates his wealth at nearly $4 billion, making him the 37th-richest person in China last year.
Through a holding company, many of the businesses have been publicly listed in China since 2010, according to Jia's corporate biography. That business has a market value of about $11 billion.
Faraday Future was established in 2014 by two people: Jia and Faraday's current senior vice president of research, development, and engineering, Nick Sampson. Sampson managed an engineering team at Tesla before moving to Faraday Future.
But since Faraday officially debuted at the 2016 Consumer Electronics Show, it was unclear who was running the company. Faraday did not publicly name a CEO or reveal who its other investors were, aside from Jia. Even now, its website lists several senior executives but no CEO.
Several of Business Insider's sources who have direct knowledge of the company's leadership structure said there have been at least two "CEOs of record," people who had the ability to sign financial documents for the company. The first was Chaoying Deng, an executive from a LeEco subsidiary who held the role until October 2015.
The second CEO of record was David Wisnieski, who was officially Faraday Future's director of finance. Publicly available documents from the state of Nevada list Wisnieski as president, secretary, treasurer, and director of "Faraday & Future Inc.," the company's legal name. He left in July 2016, and a new officers' list isn't due to Nevada until March.
Three people close to Faraday said that a third person, named Ding Lei, who was officially a cofounder at LeEco, was acting as Faraday's "global CEO" until late 2016 when he suddenly left the company.
"He was unable to contain YT," one source said about Ding Lei's working relationship with Jia.
The Verge, which reported the news of Ding's departure in late December, reported that he remains employed by Jia's LeEco's own car project called LeSEE, citing a spokeswoman for the Chinese company. One person told Business Insider said this means he remains involved with Faraday's China division, which this person described as essentially an extension of LeSEE.
The people say that it is Jia who is now acting as Faraday's unofficial CEO, directing its teams and making decisions for the company. "This isn't a strategic partnership - it's a subsidiary," said one of the people.
'Inefficient and disorganized'
"The US management team really had no say and had to do what [Jia] wanted because he was paying for everything," a source who worked in design for the company said.
The clash of cultures between Faraday in the US and LeEco in China started early, The Guardian reported last year, explaining that the Chinese managers' proposal to name the company Fara Faro was met with ridicule by the Americans, who eventually picked the name Faraday Future.
And the insiders who spoke with Business Insider say Faraday Future is often visited by groups of LeEco employees from China who frequently travel to Faraday's Los Angeles-area headquarters.
"There were times that the Beijing team would come out and learn what we were doing but were working on their own designs and then they would go back," one source said.
Bizuayehu Tesfaye/AP Images for Faraday Future
A $1 billion mirage in the desert
That push to fulfill all Jia's wishes goes back to early plans for a $1 billion factory, in a vast expanse of dusty desert land 10 miles north of the Vegas Strip. The startup's proposed 900-acre factory would be the home of its US vehicle production, and about 4,500 people, many of whom are locals, would be hired to work there. The plans were celebrated by state officials, including Nevada Gov. Brian Sandoval in April 2016.
Business Insider was at the event, where wine and hors d'oeuvre were served in an air-conditioned tent next to a vast, dusty vacant lot.
"Welcome home, Faraday. Welcome home," Gov. Sandoval declared as he took the stage.
Bryan Logan/Business Insider
One source with knowledge of the factory plans said work at the site "stopped almost as soon as it started."
Faraday and its contractor, AECOM, said the work stoppage was only a hiccup and the project would resume in 2017. At a December 2016 media tour inside Faraday Future's headquarters, Faraday showed a flashy video simulation of the machinery its future factory would have. When pressed on the timeline for the factory, Dag Reckhorn, the company's vice president of manufacturing, initially implied it has, before clarifying that grading at the site was complete and a video of the still-empty dirt lot was "basically last week, those were the last finishing touches." When asked when the building would be completed, Reckhorn said, "We will reveal that early next year ."
Business Insider's sources said Faraday Future has already purchased some of the equipment for the factory and is exploring financing options to get the project going again. But if the money is not there, Faraday may be forced to build a smaller-scale, low-volume plant instead.
Where's the money?
Unpaid bills are piling up. Money owed to suppliers alone adds up to about $300 million, executive-level sources told Business Insider. As BuzzFeed News' Priya Anand reported in December, at least two companies have sued Faraday over unpaid bills, although one of those cases has already been dismissed.
Jia, according to the sources, pushed teams to keep spending money at 100% but leaves them in the dark about sources of funds.
"There was no visibility about when the money would arrive - we were told to continue making commitments to suppliers," a source at the company said, adding that Faraday got about 10% of the money it needed each month, "only $10 to $15 million."
The sources Business Insider spoke with did say that Faraday raised a $1 billion convertible bond in China last year, but that the company is still working on getting the funds across the border.
The Chinese government, worried about the record outflow of yuan from the country, has imposed restrictions on the overseas transfer of funds by both companies and individuals, and Business Insider's sources say Faraday's top executives were wary of increased scrutiny from the Chinese government if it sought approval to convert that money from yuan to US dollars.
Jia admitted in November that he had gotten in over his head with all the projects, writing a letter to employees apologizing for moving "blindly" ahead, Bloomberg News reported.
"Our cash demand ballooned. We got overextended in our global strategy. At the same time, our capital and resources were in fact limited," Jia's letter read. In a deal announced last week, LeEco said it would raise about $2 billion by selling a stake to a Chinese real-estate developer called Sunac China Holdings. The stake sale means LeEco's own cash crunch is almost over, but it won't help the electric-car business, China Daily cited Jia as saying:
"Sunac is our second-biggest shareholder. We will explore how to use the internet to fuel its real estate businesses," Jia said, adding that its electric-car unit would start looking for investors.
AP Photo/John Locher
Faraday Future lost numerous employees and executives in the waning months of 2016, including chief brand strategist Marco Mattiacci, who arrived just months before, to wide fanfare.
- Greg Adams, head of corporate strategy
- Dave Wisnieski, director of finance
- Ding Lei, Faraday's "paper" CEO
- Stacy Morris, former head of communications
- Robert Filipovic, head of product strategy
- Sarah Ashton, associated director of governmental affairs
- Syed Rahman, operations controller
- James Chen, general counsel
This is not an exhaustive list. Notably, during the December press event at the company's headquarters, Faraday representatives boasted of a total workforce of about 1,400 people, 1,000 of whom are based in the US. A person close to the company told Business Insider the company cannot feasibly support its current staffing levels and would need to cut that number nearly in half.
Ethan Miller/Getty Images
Keeping up appearances
The company's 2017 showing at CES fared only slightly better than its disastrous debut a year earlier, even though this time Faraday had several working prototypes to show off.
Faraday's FF91 vehicle failed when Jia pushed a button that was supposed to make the car park itself. After several uncomfortable minutes of silence and ad-libbing between Jia and Nick Sampson, the stage lights dimmed and the car was moved a few feet across the stage.
The full live-streamed video that included the embarrassing flub was removed from Faraday Future's YouTube channel and replaced with an identical video that ends seconds before the failure is shown. The original video is still live on the site, and you can find it here. The malfunction begins around the 1:12:30 mark.
Faraday needed this year's presentation to turn heads, so the event, live-streamed via YouTube, featured several high-end cars - including a Ferrari 488 GTB, a Bentley Bentayga, a Tesla Model X, and a Model S accelerating quickly off the stage.
What the livestream audience did not see was a close-up look at the Faraday Future car's interior, where the many first-of-its-kind technologies would be displayed. It wasn't shown because it wasn't ready.
The examples Business Insider viewed in person at Faraday's headquarters had only hard plastic moldings of a simulated interior. Faraday had one real, working seat to demonstrate to a group of about 25 journalists.
Faraday told journalists at the time that it would not show the interior at CES. As with several other major details about the car - including the price - a reveal would come later, the company promised.
"All that stuff at CES was just a bunch of bulls---," one highly placed Faraday Future source told Business Insider in an interview. Another said the FF91 shown at CES "isn't even close to being complete," despite the company's claims that it would go into production in 2018.
AP Photo/Jae C. Hong
AP Photo/Jae C. Hong
For Faraday Future, the biggest unknowns come back to the money. If the company can successfully pull money out of China, the company could survive.
A Faraday factory could eventually be built, Faraday could produce more than just a few of its electric vehicles, and, despite a rumored sticker price of at least $180,000 for the FF91, perhaps a few people might even buy one.
The company announced that it received more than 64,000 reservations for the car shortly after CES, but people were allowed to put their names down with or without a $5,000 deposit. Sources close to the company told Business Insider 60 people actually submitted a paid reservation.
Faraday Future has a good PR team. The buzz surrounding the company has been relentless, with a steady stream of tweets, YouTube videos, and blog posts that Faraday uses to keep people talking. But so far there has been little substance to back it all up.
Initiatives that are key to getting its cars on the road, such as government-mandated crash testing, have yet to be performed.
And time for the startup seems to have almost run out. As one Faraday Future source who spoke with Business Insider put it, "If they can't figure out a way to get the money out of China in the next 60 days, the suppliers would essentially force them into bankruptcy."
- Cisco says a company 'leader' who encouraged TikTok followers to report strippers to the IRS is no longer employed at the company
- Cryptocurrency investment 101 — here’s how to do your own research (DYOR) and invest in the right digital asset
- Realme GT Neo 2 5G review: Great performance, fine display but camera needs work
- India's farmers protest takes a gruesome turn with a chilling murder at the scene — here’s the sequence of events
- Bizarre! Shubhman Gill was brought back to bat after being declared out
- Ruturaj Gaikwad and Faf du Plessis — amazing data on how the two openers led CSK to IPL 2021 championship
- Budget and safety top criteria for Chennai households during festive season:LocalCircles
- Electric bus makers on a roll as states like Maharashtra and Karnataka send in large orders