Fisker: Buyout or bury it?

October 2, 2012, 9:43 PM UTC

By Doron Levin, contributor

FORTUNE — Fisker — the maker of tony extended-range electric cars — looks like it is on the ropes. Recalls, quality issues and a not-so-glorious review from the car-buyer’s Bible Consumer Reports have contributed to the idea that the maker of the $106,000 Karma is in trouble. But perhaps the company isn’t struggling for its life exactly, just its life as an independent company.

Tony Posawatz, the former General Motors (GM) executive who has taken the reins of Fisker as CEO, said on Monday at the Automotive Press Association in Detroit that Fisker has held “discussions” with other automakers about possible alliances, including BMW. He declined to elaborate, while acknowledging “missteps” by the company caused by “too much ambition” and a “too aggressive” development of the luxury vehicle. Creating new vehicles is an incredibly lengthy and expensive proposition, especially for a startup.

Whether the talks include possible mergers or acquisitions wasn’t revealed — but talks about technology alliances when one party has serious financial difficulty often have a way of turning into acquisition talks. The company is based in Anaheim, California; the Karma is built in Finland under contract by manufacturer Valmet.

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The U.S. government has suspended Fisker’s $529 million loan due to its determination that the company failed to meet government milestones. The money was to be used, at least in part, to manufacture a second, lower-priced car model, the Atlantic, at a former GM plant in Delaware. Posawatz only would say that Fisker still “intends” to build the second model there.

Last week Fisker said it raised $100 million in private investment and is looking to raise more either from private investors or eventually in an initial public offering. The company has sold about 1,500 Karmas worldwide, about 1,000 in the U.S. in less than a year.

Posawatz, who retired from GM, had been head of that car company’s Volt program. His familiarity with extended-range power trains made him an obvious candidate to replace Tom LaSorda, the former Chrysler executive whose expertise was mass manufacturing. LaSorda “just wasn’t ready to make the three to four-year commitment” that Fisker required, Posawatz explained.

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An alliance or merger with another car company could keep the Karma alive and perhaps even pave the way for the Atlantic. The Karma goes from zero to 60 miles per hour in 5.9 seconds and has a top speed of 125 miles per hour. Its fuel efficiency is rated at 54 miles-per-gallon, combined highway and city. The car can run on battery power only — or a combination of battery and internal combustion engine, similar in concept to the Chevrolet Volt. But the Karma, with its luxury appointments, is meant as a toy for the rich. Posawatz noted that the average Karma owner has four cars.

Tesla, another California-based electric-car startup, has forged alliances with Toyota (TM) and Daimler — and possibly provide the model of what Fisker might be able to do with BMW. BMW could be interested in intellectual property Fisker has amassed as a result of its development work, reflected in the 155 patents the company is saying it has. The Karma already bears a striking resemblance to the rest of BMW’s model line, not surprising since co-founder Henrik Fisker is a former BMW designer.

The company’s 79 dealers worldwide, 46 in the U.S., already represents a fairly large network and investment by the retailers, in light of the 1,500 or so Karmas sold. If Fisker is to survive it needs an alliance with a capital-rich partner soon. Otherwise the company must find investors who are true believers that the electric-car market is one that will bear fruit.